Sounds suspicious... should really only go with providers where you have a guaranteed CPU allocation. If they actually have any sense they would restrict your CPU usage automatically (even though in this case it sounds like you haven't even been using any CPU!)
+1 for concerto - you would be better off paying for your own private VPS that you can manage. OpenVPN doesn't require much CPU at all and you can get a good amount of traffic through a good VPS provider.
I wouldn't go with 1&1 for a server but the general concept of a cloud server is that it's highly redundant. If the hardware it's on goes down it will automatically migrate to a new hypervisor (a powerful server hosting VPS servers) without any downtime. The hardware just 'drops' out of the...
Firstly it looks like they have open_basedir restrictions in effect which look pretty strict. It shouldn't be a problem but with free web hosts it often can be.
As for the default web page redirect issue, I think this might actually be your browsers cache redirecting you to this page rather...
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