I don't see any issues with implementing scale sets within the Azure cloud for an ArcGIS Server site. Esri already provides some CloudFormation templates in AWS that employ auto-scaling groups, so the principles of those templates may be helpful to get you started.
Additionally, there were some parameters introduced in ArcGIS Server 10.7.x that may prove helpful for keeping track of terminated instances and removing them from the site, specifically machineSuspendThreshold and suspendedMachineUnregisterThreshold.
Provision a highly available ArcGIS GIS Server site (HA ArcGIS Server site readme)
https://arcgisstore1081.s3.amazonaws.com/14362/docs/ReadmeHAServerVPC.html
CloudFormation templates to deploy ArcGIS Enterprise on Amazon Web Services | ArcGIS Enterprise
https://arcgisstore1081.s3.amazonaws.com/14362/docs/index.html
Server properties—ArcGIS REST API | ArcGIS for Developers
https://developers.arcgis.com/rest/enterprise-administration/server/serverproperties.htm
Hope that helps!
-- Chris Pawlyszyn