Almost the same scenario happened to me after I got banned for writing a script for me to centralize my link trades on his network. Feeling this to be unfair as what I was doing wasn't resource intensive unless the servers were p90's with 16 megs of ram, is what prompted me to start
www.waqn.com. No offense to Twan or anyone associated with his sites/services. I didn't agree with his decision, so I did something about it - something positive. Now we've got almost 800 blogs hosted, and so far no complaints and I'm more than happy to have the webmasters using the service that I do. And for the record, $0 has been made since the opening of the service. The ads up top hardly get any sexy time from surfers. I gotta run, but long story short - find a positive way to turn this around for yourself and maybe help others in the process. =)
-JM