I once tried doing the thing where you block entire swaths of domains using a hosts file, yes. The drawback is that sometimes, some domains that host ads will also occasionally host content you need. Akamai, for example, was one of them.

So I found that it was much better to just surf with Firefox and Adblock Plus, and not deal with the hosts file. Accomplished the same task without the "false positive" behavior. Also, easier to turn off when I need to.