As a consumer with static HTML pages for a hobby web site, I probably wouldn't be interested in anything less than a T1 for the Internet connection. And if I ever saw it down (or heard it was down from users) more than once, I'd be complaining. So you'd need redundant Internet pipes.
As a consumer with a business site, I'd probably demand redundant T3 pipes at least. I have a database and dynamic pages, so 2G RAM would be a minimum (and that's only with a small database). I would also expect the server to be houses in a secure, climate controlled data center with automatic fire suppression system and redundant electrical backups, and 7/24 monitoring and support with qualified technical staff.
what are the absolute minimum system/internet requirements for a profitable server?
To be honest, you're only going to be profitable with economies of scale from many, many servers in a dedicated data center. Do some research for hosting plans and you'll likely find that everyone else is going to beat you on price.
For the business customer, your server is nowhere near adequate. And a hobby user can get far more than you offer for less than you would charge just to break even.
explain why most forbid running servers from home?
because most ISPs offer non-commercial service for lines to people's homes. They charge much more for commercial service (because they can, and because commercial users typically require higher levels of service and more throughput than home users).
