This solution isn't designed to replace fault-tolerance on local hardware. It is for close to realtime offsite replication and backup.
Data in S3 is stored in at least three geographically separate locations and snapshots are very fast and very efficient on storage space.
The final major advantage you get through a solution such as this is that if you do have your primary site go down (floods, tornados, etc), you can bring up all your existing images via EC2 without having to have a bunch of redundant hardware sitting around waiting for disaster to strike.
And what do you pay for this? $125/month plus a per GB storage cost CHEAPER than enterprise storage generally is.
In contrast, storing 50TB for 5 years on S3's reduced redundancy storage would cost $250,000. If I ever need to transfer any of that data back to my data center, there'll be a hefty bill for that as well.
Also, you seem to be forgetting that you still need local storage for your images anyway. This is a hands-off backup and disaster recovery product.
For full disclosure, the Storage Gateway's pricing isn't the same as S3's at the moment. They only have one storage tier and it is $0.14 per GB, no discounts. Therefore, 50TB of storage over 5 years is $420k.
Having said that, what would it cost to:
* Not only have your primary but 2 x secondary PS61000E's.
* 2 extra datacentres with connectivity to themselvse and your primary site.
* Software to manage asynchronous streaming of data from your primary to 2 x secondaries.
* Software to take consistent backups of these images and store in at all three locations.
* Software to ensure that your secondary sites contain only encrypted data.
* Cold-spare hardware at a secondary site capable of running all your images.