Yes - the lifetime service does 'follow the TiVo' even if it's sold to another user**. The lifetime service is actually for the TiVo and not the buyer - so if you get a new TiVo or if your's dies you can't move that service to another TiVo.
There are exceptions to this - TiVo recently ran a special where if you bought a new dual tuner unit (one where you can recorder and watch 2 different shows at the same time) you were allowed to switch the service from an older machine. I took advantage of this - had an older unit where the modem was blown and I was using an external modem (and the hard drive was too small - blah, blah, blah) and got a cool dual tuner for my office that I love.
There is a company that specializes in TiVo's - sales and repairs - called Weaknees -
www.Weeknees.com - I have used them for a repair and found them to be quite reliable.
I just got an email from them that they are offering a 40 hour Humax TiVo with the built in DVD recorder for $49 after rebate. They also say this particular TiVo is still eligible for the lifetime service contract at $299. They have other size/capacity units at similar savings.
Just to add my disclaimer - I have never bought a TiVo from them so I can't vouch for them in that regard. As I said I sent one of my TiVo's to them for repair a while ago and they did a great job for a reasonable price and it came back very quickly.
John
**PS You're supposed to 'switch' the lifetime service when you sell or give a TiVo with it to someone else - make sure you have the sell take care of that for it (or provide you with all the info needed) if you do buy one from eBay that has a lifetime subscription with it.