Tell them your fee is $800 ($500 for the work and $300 for hosting). If they don't pay you don't deliver the product.
Edit 1: Or tell them your fee is $500, not including $300 hosting.
Edit 1: Or tell them your fee is $500, not including $300 hosting.
Thanks a lot for responding though.
Be willing to admit you may have made a mistake. Even if you believe that they are ultimately responsible for the breakdown of your arrangement, start off your communication by apologizing for poor communication, or something along those lines. They will appreciate your honesty and humility, and be more willing to listen when it's time to talk about money. Do your best to be calm, patient, and kind, while being firm, and you'll likely at least gain some respect.
To your customers, that hosting cost is now included in their minds of what their site is "worth." It shouldn't be. Your work is separate, and the hosting costs have nothing to do with how much your work is worth. Mixing them up was a mistake on your part. You now have to prove what you did was worth $800, instead of proving that its worth $500, with $300 hosting costs (which would have been paid before this).
I'd say stick to your guns, but also come up with a "carrot" instead of the sticks everyone else is talking about. Yeah, you might not think you need to, but adding in a few extra features to make sure you get your $500 might be worth it if you can pull them off quickly.
And by carrot, I don't mean saying you'll do what you were going to do in the first place. To work psychologically, it has to be beyond what they were expecting.