i dont see a problem with having them on the same machine as long as that server does not control any funds.
any bitcoin server which can be used to send money should be on another network and on a machine which you control physically to avoid attacks from your hoster.
No need, the machine can be encrypted, or even just the wallet encrypted and unlocked when it has to send out funds. And only use https calls to get data so that the host can't find clues in the traffic.
This is bad advice (except the https part).
notme has given you good advice if you want your funds to be safer. I won't repeat what he said, but his advice is sound. (You should also be concerned about using a VPN, bitcoins have been reportedly stolen from them even with good security, by ISP employees.)