Starting up an online book store

I want to start an on-line book store and exploring the options on hand. Till now, I have gathered the list of website hosts, budget of dedicated server machines(in case self hosted) and a list of available ecommerce solutions. Therefore, the question doesn't target What to use, instead Which to use.

1. Being a developer, I am inclined on developing the solution on my own. But, since i haven't developed such an application, Should i give it a shot or try an existing opensource solution. (Have limited budget, so can't hire anyone else for development).
2. Should I have my own dedicated server or use a hosting company. What factors determine this decision ?

I see you've conducted a fair amount of research including items such as: website hosts, budget of dedicated server machines(in case self hosted) and a list of available ecommerce solutions. However, I'm noticing one key thing that your lacking. I didn't read about you evaluating your potential market. Let's face it; like said by Craig, you're in a crowded market, so going head to head with Amazon or BN would be near suicide, unless you are trying to cater to a niche market. For example, you could create an online book store for developers, or designers or something. You should be able to answer this question before even thinking about technology. Now, I'm not sure if this is something that you have addressed and this question only concerns the technical aspect; if it is, I apologize. I'm just trying to save you time down the road.

I hope you don't get too trashed by people questioning your idea rather than answering your questions. It's an ambitious one, but

1. There are a lot of open source e-commerce solutions out there - Magento and OsCommerce come to mind. There are also hosted solutions like Shopify. Also, the big two (Amazon and BN.com) will let you post your stuff as well to sell. A Google search looking for e-commerce platforms, or a post here asking specifically for recommended e-commerce solutions, will give you much more detail on this.
2. As a single-person operation, you really don't want to manage it yourself; you're in a crowded field, and you need to promote the hell out of your bookstore to succeed. Go with either a cheaper hosted solution or just joining Amazon/BN before you try to administer your own dedicated server or take care of a Magento installation.

You aren't giving a lot of detail on your biz model, so it's hard to tell whether joining Amazon/BN is in line with your goals, so maybe they're not an option. In that case, just set one up with a provider like Shopify and suck up the monthly fee and % take you have to spend - consider it a bargain compared to handling the IT side of your operation.

Maybe you can drop a comment on how you're going to compete with the big 2? I'm genuinely curious - you're going to be fighting an 800-pound gorilla there. It looks like you may be doing this outside the US, is that a consideration? What are you going to do better than they are currently doing to drive customers to you and away from them?