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IMHO self hosting is false economy. Do it for fun, but not for your business website.

But if you insist on the cheapest. You could run IIS on your windows 7 desktop and an external drive as your file server. You can add an SQL database to your win 7 desktop later as needed.

or get a hosting package that includes mysql for $5 a month, and a cheap nas from officeworks for $150 add your drives for another $200 and your set with raid1 redundancy.

FYI
power consumption of running your desktop 24/7 is around $250 p.a
and the user experience for self hosted websites on adsl 2+ is shocking.

Steve