Your 4 steps above are correct, and the answer to your question is yes you still have to pay for the hosting.
My step 4 I was referring to was over riding his, so no you do not need to add another 1k article.
I too was confused when you said add another 1k article, I thought you meant add another 1k article to the aged domain. Lol
So gsy159,
Have 1 1000 word article with 2 -3 LSI keywords for your aged domain. Then write a unique 1000 word article to your new domain using your primary keyword.
Bobby - Just won a 2 year old domain with decent PR. Godaddy said it will be "ready" in about a week. Whatever that means. I'm going to give them a call later and ask what's up with that.
In the meantime, maybe I should write those articles myself to cut the initial costs of testing this method out.