SQL Server Transaction Logs in the Cloud
In my extensive testing of cloud SQL on cloud servers (rackspace cloud, to be specific), I found that splitting the ldf and mdf to distinct block storage volumes made a significant improvement in performance. I achieved really hot performance by putting the ldf on an SSD based block storage volume and the mdf on a standard block storage volume.

Ultimately, of course, a block storage volume is a shared SAN somewhere. And local "instance" storage is on the hypervisor itself. So the hardware topology of your cloud environment will dictate what config will work best.