A: Hosting companies are not held accountable for hosting illegal content if they cooperate with authorities. There are specific procedures for the gamut, including child pornography. The FBI is very active in working with established hosting providers to investigate and take down illicit and illegal content.
B: Your suggestion would shutter smaller startup hosting companies, raise prices at others, and cripple the startup community that Hacker News loves so much. The fallout from your suggestion would be so colossal that the harm to innovation from software parents would look minuscule in comparison. Should we punish the telephone company for every bomb threat that traverses the line? Dreadful.