When you're setting up a masternode do you ever import your masternode private key into your vps? Is anything stored on your vps that if someone found it they could steal your coins? Also, if someone was able to see your terminal window when you were setting up a MN would there be anything they could do to steal your coins? I looked at Tao's guide and it doesn't seem like it to me, but I just want to be sure.
No, you never import your private key containing the 1000 drk onto the vps. In doing so, you're running a hotnode. You can safely manage a hotnode, but you better make sure your passphrase is solid and security is appropriate to prevent unwanted users from gaining access to your wallet file on breach. You could use bash variables for importing keys if you so desired to go that route and also were cognoscente on clearing bash history to further be on the safe side.
Personally, I'll stick with the cold-remote setup.