No one can know you host onion sites in a VPS - Just get a KVM VPS with anyone and do it there.
Please stop spreading things you have no idea about, Middle nodes and Internal servers are not visible from the internet at all and untraceable to any ISP, thus there is no risk involved at all.
Honestly it's simple risk management. As a client, by violating the provider's ToS and agreement, you take the full legal responsibility behind it. It's not really what's allowed and what isn't, it's simply covering their butts to make sure they're not on the hook.
Now does it work 100% of the time? Not really. Can it (and does it) affect normal business? Depends on how high risk it is (many variables involved). But if for the service provider your server is confiscated because someone hosted a Cheese Pizza .onion site on it, well then you're out of a server (especially if it's a VPS node, then your clients are out of their servers as well) and the offending client doesn't have anything to lose (well... besides probably an investigation).
Tor is honestly just that. It's a high risk process that now certain providers have stopped allowing (via note on your service agreement) simply because they don't want their servers being raided by the police. Not that Tor is only used for that but due to the nature of Tor (in my opinion anyways) it carries a slightly higher risk.
Use your head. Use your own judgement. If you want to break the Terms of Service and carry the entire legal responsibility behind it, then go for it.
Also, if you set it up right then of course it's almost untraceable to any ISP (besides for increased bandwidth usage between other tor relay nodes). But a single mistake could leak your IP and therefore make it traceable. The software stack you have to configure and worth with to make it all work though can be such a pain in the butt that a single mistake may happen sooner rather than later.
Edit: To answer @
Suspook's question. While I won't say most, many hosts will not allow this because it's such a headache to deal with (and a ton of legal liability). They want to make money, not have to potentially pursue (and pay for) a legal battle that YOU as a client brought on. It's just bad for business. In the end, my opinion is that it's something that theoretically is a great idea but realistically carries way too much risk that I'd rather not allow it. However there are people who are more accepting of Tor and are more than willing to accept you as a client. Contact any host's Sales department if you can't find any information on it and ask. That's what they're there for!