Ken - Part 1: Writing for both, if done correctly, can make a solid income online. Here is the thing, if you write for hosted sites (squidoo, hubpages and the rest) then you are limited by the rules and regulations of the hosted sites. That is not a bad thing because that can result in less spamming tactics used by others, but it is limiting your abilities to conveniently promote products/services that interest you. However if you use the hosted websites profile page and have it link back to your domain name, then that will cause the search engines to give your site a traction to it. Hopefully that makes sense. So if you write once a week to hubpages, squidoo or some other highly trafficed and active hosted site you could reap the rewards through adsense, ebay, amazon and such.
Now if you were to use your own account then you can download wordpress and customize the blog to your likings along with adding more and more functionality to it by adding things such as shopping carts, banner ads, and the such. You also decide what it is that you advertise on your site so the control factor is up to you. A new domain will take some time to generate organic traffic to that is why I made the suggestion up top, or you can go with a PPC campaign to get instant traffic, that choice is up to your advertising budget.
Part 2: I am not exactly sure if you can convert your hubpages account to a personal hosted account because your hubpages account is just your username with the hubpages domain name attached, it is kindda like a subdomain name if you wish. Hubpages owns that domain name and i am not sure if they will sell you their domain name.
Hope this helps.