Q: How can I increase the size of my Windows Azure Virtual Hard Disk file?
A: Currently, the maximum size for a Windows Azure data disk is 1TB. You can select a smaller size when you create the disk. If you later decide that you want to increase the size, you might be looking for a way to extend your existing disk. However, no supported method exists for extending a Windows Azure Virtual Hard Disk (VHD). Some third-party solutions do exist; for example, CloudXplorer has an extend virtual disk capability. Alternatively, you can try a solution such as the one Maarten Balliauw discusses in his blog post "Tales from the trenches: resizing a Windows Azure virtual disk the smooth way." The best option that's currently available is to add a data disk of the desired size, copy the content, and then remove the old data disk.
You should always create your data disks at the maximum possible size, which is currently 1TB. Windows Azure uses sparse storage; therefore, even through you have a fixed-size VHD, you'll only pay for the amount of data you actually write to the disk. Creating a 1TB disk doesn't cost any more than creating a 1GB disk, if both disks contain 500MB of data.