Agreed - I thought 1&1 was fine, although overpriced (they gradually jacked up the price as time went on, presumably thinking it'd be too big a hassle for me to leave at that point). The problem was they decided I still owed them money after I had cancelled. Not only did they not inform me of this bogus charge, they sent it to a collection agency so I had to find out on my credit report. 1&1 - I give you money, you give me service. I stop, you stop. End of transaction. Please do not give these crooks any of your money!
That said, GoDaddy sucks too and they made it very difficult for me to leave (it was a year long-process for me). I agree with the other folks who mentioned Namecheap - I manage all my domains through them and have been very happy thus far. Haven't tried to transfer any domains away from them yet, so I can't speak to that. Hopefully they don't pull the same shenanigans as the aforementioned scam artists.