is the $175 hosting fee on the 1st and 15th of each month deducted from the miner's generated BTC and then BTC payouts are given to the shareholders?

Total mined
minus hosting
minus management fee (0.5%)
minus transaction fee's
=
total to distribute

You can see the calculation that would be used in the 9-12 payout sheet.

https://docs.google.com/spreadsheet/ccc?key=0ArdD1NXRwJNSdGxRQ0oyX29XbjlsYVZFMEx5bEJPUXc&usp=sharing#gid=0