Is there way to change to instance type in Azure Cloud Services
The vmsize is attribute of csdef file and not of ServiceConfiguration.cscfg
You can see on http://msdn.microsoft.com/en-us/library/jj156212.aspx
Yes, when you create your service model, you can specify the size to which to deploy an instance of your role, depending on its resource requirements. The size of the role determines the number of CPU cores, the memory capacity, and the local file system size that is allocated to a running instance.
Basically, you need to change the “vmsize” parameter in the ServiceConfiguration.cscfg file to the required value (vmsize="[ExtraSmall|Small|Medium|Large|ExtraLarge]") and re-deploy the package back to Azure.
http://www.nimbo.com/blog/changing-the-instance-size-from-the-windows-azure-management-portal/