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It looks like Hiawatha + Banshee is the most secure combination for building a new web server. Congratulations to Hugo Leisink!

If security is the overriding concern, does anyone have suggestions about which distribution/server operating system one should pair with these?

As for hosting, I assume that a dedicated server is a more secure way to host such a system because any cloud solution that uses virtual machines is vulnerable to bugs in the environment maintained by the cloud provider. If so, any thoughts about the tradeoff between paying for a dedicated server provided by cloud provider versus placing a server in a colocation facility?

Hiawatha version: none
Operating System: none

Which distribution / OS you choose is not really relevant, as long as it is one you are comfortable with and there is active support for it. Debian, Ubuntu, FreeBSD, CentOS, etc, they will all do fine.

Yes, a dedicated machine will be a bit more secure than a virtual server, but that doesn't mean that a VPS can't be secure enough. It (also) depends on the hosting provider and their commitment to security. And for the rest, well, it's up to you if you want that extra bit of security at the cost of maintaining and paying for the hardware. I personally don't think it's worth it for the VPS this website is hosted on. But if I were a sysadmin for the ministry of defense, I might decide otherwise, maybe.