We tried to host a SQL server on the Amazon cloud. 10GB was a huge problem because windows and SQL patches and downloaded components took up too much space. It was almost impossible to get SP3 for SQL 2005 plus a recent updater package. We ended up having to remove other installer packages. We had already moved our databases and the system databases off the C drive and onto EC2 storage. There just wasn't enough room.
For Amazon, C is not expandable beyond 10GB. This is very low for a server with extra software like SQL. While it's technically possible to run a SQL server in Amazon's cloud, I would never want to trust my data to their cloud. There were too many work arounds that we had to do to get things reasonably working.
For IIS, I would think logs and site files would be moved to EC2 and most of your problems would have been avoided. Or, site files on EC2 with log files on the locally attached/volatile storage.