I don't think they're getting that much for the ads. After all, netflix manages to offer ad-free stuff for $8/month, same as Hulu+. It's probably closer to the difference between $8/month and $12.
I think the ultimate reason Netflix is creating it's own content is that the more content it controls, the more influence it has over the other media copyright holders. If Netflix can legitimately argue that if copyright holder X doesn't play ball, that it's average subscriber won't sign up to site Y for $Z revenue because the subscribers will simply watch something else, such as one of Netflix's exclusive shows, then they're leaving money on the table, and they don't like doing that.
Sort of like a backwards HBO. HBO does great shows, but are really exclusive about them. If you want to see Netflix's shows, you have to sign up, but it's not nearly as expensive as a cable package + HBO.
Hulu however has current TV a day later. Netflix doesn't get it for months. Hulu's also sponsored by the content networks who are trying to basically regain their ad revenue.
Netflix is creating original content because it can - its business model depends on subscribers and growing that subscriber base. Showing unlimited movies that have been out for months, or TV seasons that everyone else has seen months ago doesn't grow subscribers, especially since OTA TV will get them for free too, just on a less convenient schedule.
Instead, Netflix has to basically create content or inherit content that the networks can't justify carrying so subscribers have something new to watch.
Hulu, Amazon, iTunes, etc., they get the latest TV within hours of airing which is why they generally cost more because their first-run. Netflix picks up the rest.
In the lifecycle of a movie, it first comes out in theatres. Then it comes out as a digital rental (CinemaNow, Vudu, etc). Then it comes out as purchase - either digital (iTunes, Ultraviolet, etc) or physical (DVD/Blu-Ray). Then general rentals, then Netflix, and finally, regular free TV. This takes around a year or two to fully execute.
The lifecycle for a TV program is first airing, then digital sales (Amazon, iTunes), and Hulu. Then months later, season box sets on DVD, and Netflix.
If you're not fussy about waiting, Netflix is a great service. Most people though can't wait that long for their TV, so there are options. And Netflix knows once they have the people who don't care or who don't mind waiting, their subscriber base is saturated. They need to have new content to attract new subscribers who may not watch much of the catalog, but will catch the exclusives and pay for it.