I'd say the dedicated server, simply because it's 100% dedicated resources. The hardware is better on the VPS, but you're also going to be sharing that hardware with at least a few dozen people.
The RAID is just fine for your configuration. All RAID1 is, is 2 mirrored drives, for a certain amount of redundancy. That drive setup isn't going to be as quick as RAID10, but again, you're sharing that RAID 10 with a lot of other people.
Not sure how much you plan on paying for the i5, but if you can afford to move up to an i7 (i.e. i7-2600 or so), you're going to see a considerable performance increase.