Whether to use multi sites is really a business decision that I would base on whether you intend to be able to give your customers a copy of their site and their data if they ask for it. If you do then I would use a separate installation for each customer so that the data is isolated and you can make a backup easily without including the data for other customers.
If that is not a concern then the multi site approach has some benefits, it does use less resources than installing separate IIS web sites for each site because each IIS site has some overhead of memory usage whereas in a multi site installation it is just one IIS site and one app domain. Its not a huge savings though.
It is true that if you have a problem upgrading then it affects all of your customers as Aaron said, but the counterpoint to that is that you only have one site to upgrade so it is less work to keep the sites up to date than if you have to upgrade a bunch of sites separately.