Re: internal server error after activating bp
tbh having looked at your hosts site as well I wouldn’t have been able top pass a judgement as to whether they were big or small, there are a lot of factors involved in good hosting and these are not necessarilly apparent just by looking at a site.
If they have offered to tweak settings to you requirements that is a good sign, good customer support counts for a great deal with hosting.
If your happy with this host I would stick with them, especially if they are willing to tune things as you need them.
As for basic requirements you need Apache to allow overide so that .htaccess rules will work, you need mem limits for scripts in PHP set quite high (higher than default) PHP version is best at 5.2 or above.
There are probably guides to optimum and required settings if you look around buddypress.org and wordpress.org and perhaps other members will chip in with min requirements for a healthy installation.
Out of interest what sort of hosting account do have presently and what do you plan to upgrade to? and are you intending running WPMU for it’s blog creation capabilities.