Migrating development and production databases to AWS
One of my customers is running their entire production site up on EC2.  They've had pretty good luck with it, except for when there is some sort of Amazon caused outage (which there have been a couple of over the last couple of years).

The biggest thing that you need to worry about is planning for an EC2 site failure with your application.  If EC2 has a major failure are you ok with the database being offline for a couple of days, or possibly loosing all the data in the database?  If not then you'll need to handle that via traditional SQL Server DR planning by having another server running as a hot standby server in another Amazon data center.  The same goes for the web servers and anything else that hits the database.

The slowest part of using EC2 is the storage.  There are ways around this by getting lots of volumes from Amazon and striping across them within the VM.

As for the dev machine, that's pretty easy.  Just toss it up there and it should be fine as long as you've got backups going somewhere.