Absolutely right. I had a nice little on-line portfolio which referenced 6 sample sites:
Site 1 closed down for about 3 months during funding negotiations - just as I was looking for work and wanted to refer to it.
Site 2 had a technical tutorial I wrote. It became a pay-a-subscription site!
Site 3 was a dotcom I worked for. They laid off a load of developers but carried on trading. The site got more and more out of date (e.g. competitions still up 3-4mths after the closing date). It just looked horrible in the end and about 6mths work had to come off my portfolio.
Site 4 suddenly disappeared when the owner didn't renew the domain name registration.
Site 5 is just a fan site I designed. Quite nice, but nothing special or professional.
Site 6 still works at the time of writing (hooray).
So, I'm seriously thinking of just mocking up a demo site using as many tricks of the trade as I can squeeze in and hosting it myself. Then I can just say, "I used this script in www.Something.com
and this design in www.SomethingElse.com
etc". If one of those sites happens to still be alive then that's a bit of luck, but I won't be relying on it any more that's for sure.
I don't think prospective employers will be too bothered about where they see your work - on your own site or a commercial site. They can get references if they want to confirm that you worked where you say you did.