Autoscaling is your friend, but you can also use "auto-healing" if your stack is built on Amazon's AWS OpsWorks and you just want to keep a single instance alive. It will automatically spawn a replacement instance and reattach and mount any EBS volumes.
My understanding is that that doesn't work correctly in the case of AZ failure; the EBS data isn't duped to another AZ and so your instance will fail to come up. So it's not really a solution.
Quite possible. But it depends on what level of disaster you want to protect yourself from. Single EC2 instance termination is much more common than an entire availability zone going down. I'd say OpsWorks auto-healing is better than just running a standalone EC2 instance, and configuring a full auto-scaling setup with your own custom AMIs and boot scripts is even better, but also much more work.
