HTML Being Stripped Out from HTML Block

For the first issue, your HTML is invalid. As an example, this:

<p>Recommended host: <a href="http://hostinghq.in/hostgator" rel="nofollow" target="_blank" ></a>Hostgator</p>

Should be this:

<p>Recommended host: <a href="http://hostinghq.in/hostgator" rel="nofollow" target="_blank" >Hostgator</a></p>

ignore the rel="nofollow" - that is added by the forum software

The "Hostgator" was not in the right spot, and your hyperlink was not linked to any text.

I'm not sure what you mean with your second question. HTML blocks are designed for presentation elements in the form: the information is not captured in the entry.

And in addition to showing the recommendation, you need to store that recommendation in the entry, correct?

I think your approach is fine (showing the HTML block with conditional logic.) Add an admin only field which stores the hosting recommendation (godaddy.com, hostpapa.com, etc.) with conditional logic as well. Just use the same rules you use to show the HTML block. That way, you show the visitor their HTML recommendation with the link, and you store what you recommended to them in the entry.

Oh, instead of the HTML being shown on the page when they make their selection, you want to show them their option on the confirmation page? Is that correct?

You can ignore the advice about the admin-only field if you do not need to store their recommendation.

If you want to show different recommendations in the confirmation, based on their form selections, you can use the conditional shortcode: http://www.gravityhelp.com/documentation/page/Shortcodes#Conditional_Shortcode

Regarding your last sentence, that will be related to how you have configured the conditional logic. Please recheck.

If the value of the selection is literally "1-3" (a string, not a range of numbers from 1 to 3) then this will work. You could also give each one of your radio buttons a value, so for your four choices, A, B, C and D, then you could use

[gravityforms action="conditional" merge_tag="{How Many Websites Will You Host in Your Account?:1:value}" condition="is" value="A"]

Note the addition of ":value" in there, to test for the value of the selection, not the label.

Multiple conditions cannot be combined or nested in the conditional shortcode. If you have a complex requirement, you may have to use a function in your theme's functions.php to test all your conditions, then return the proper confirmation message. You can use the gform_confirmation filter to run your code http://www.gravityhelp.com/documentation/page/Gform_confirmation