Dan, thanks for the recreate description.
I'd never been aware of 'quick-create'.  I'd built another wrapper around the 
azure cli to do something similar. https://gist.github.com/smoser/5806147

I think that the crux of the issue here is in the change to systemd we
do not block mounts from happening while 'cloud-init-local' and 'cloud-
init' units are running.  Because of this, I think that while cloud-init
deciding to format or not, the old entry in /etc/fstab gets used, the
filesystem gets mounted as ntfs, and then the attempt at mkfs fails (as
seen in the log).

I'll poke a bit more.
Thanks for the cli instructions.

Scott

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https://bugs.launchpad.net/bugs/1611074

Title:
  Reformatting of ephemeral drive fails on resize of Azure VM

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