Hi Dan
Regarding your question of "when to upgrade", that's more down to the revenue that you're generating from your client base. Look at the Reseller account as step 1 inventory supply. It will get you started and get the ball rolling, but will only take you so far. You can source supply from multiple reseller accounts, on different servers - and that's a pretty good strategy, if you didn't want to upgrade to the VPS/Ded path. I've supplied some hosts who have done this, and they do very nicely indeed. They then went to dedicateds when they had used 10+ reseller accounts, and had a comfortable revenue base to do so.
The goal is to upgrade that reseller plan as your client base expands, thus expanding your inventory supply capacity. Part of this upgrade process could be multiple reseller accounts or a VPS or your own dedicated server. Again, this comes down to your revenues that you are generating and your business model and your individual circumstances.
After your 1st server is generating your target revenue/mth, you add another server, thus further expanding your inventory capacity. Then you just keep adding more inventory as your client base expands.
Hope that sheds a little light on "when to upgrade".