Your main problem is also what you are trying to sell - your simplicity. The site looks bad -- as in, it looks like the Rails 15 minute blog tutorial with a few extra things. This isnt simplicity - this is bare-bones. Simplicity is easy to use, easy to understand, and beautiful to look at. After I signed up I was immediately thrown into writing a blog post. What? What is this? Am I supposed to write a post? Is it private? Who can see it? You've thrown me into the water when I don't know how to swim, because you assume the life preserver is getting in my way.
I don't have a tumblr, but I tried them out today. I was up an running faster than your site - and they don't charge money! They didn't ask for my first or last name, all they asked for was email, password, URL -- all on one page as well.
Finally, the fact that your site is so bare-bones, but yet charges money, will cause problems. What's to stop me from building a site very similar to this in a weekend and charging $5/month? Or nothing? I feel it will be extremely hard to have a good business plan with "we have less features".
