I think it makes good business sense. It comes less than a year after they bumped the $10/mo instance to 2 GB RAM. They must have realized they were losing market share just by dint of there being no $5/mo option to compete with DO. Even though this is the bottom of the market, as you say, some of those "one-and-done" projects must hang around and need to scale eventually, and it's clearly easier to scale up on an existing platform than migrate to another. I know this takes away one of the two or three big reasons I ever have for using DO instead of Linode!