I'd second this. I've found that VM's (especially Windows) run even more reliably than what I had on EC2 (sometimes the machines just got soooo slow on EC2 for no apparent reason)
When a server gets slow, log in and look at top or vmstat. There's a field called st that stands for steal time. If you're using a micro, you have higher peak CPU available, but lower baseline. We found they were notoriously bad about the average CPU we got and our default is now a small (we also moved to non-ebs backed instances for the primary drive for other reasons, which is unavailable on micros). If your steal time is high, you're over your CPU budget and it's time to look at a bigger instance.