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First, upgrading is very simple and your existing system is migrated to the new host, so you won't lose any configuration. Upgrades within the same data center even maintain your IP address(es). There will be a modest down time (mostly dictated by transferring the disk images) needed for the migration. Probably no more than 10-15 minutes for upgrading a Linode 512 to something larger. As long as you aren't upgrading for disk space (e.g,. you just want more CPU/memory), which is the most likely case, you can then immediately reboot, otherwise you'd want to resize your disk images first.
I'd certainly consider starting small and growing if you find it necessary. You won't waste any money - everything is prorated if you upgrade. Of course, you could also take the opposite approach - start larger, and downgrade if you find you can, at which point any savings is credited back to your account (or just used to offset the new rate, not sure - either way you don't waste any of the money spent on future time for the larger plan).
In terms of users supported, it's less a question of total users registered, and even to a lesser extent simultaneous users, as it is the instantaneous number of requests you have to service.
For example, I'm not sure how the quiz you refer to works, but even if you have 70 people taking the quiz, let's say they all take 15-20s per "question" - that's only about 4-5 requests/s your server has to support. Let's say your configuration can do 5/s max. Even if all 70 click simultaneously - your worst case response would be about 15s which is pretty bad in absolute terms, but probably not that bad as a worst case scenario for such an unlikely event.
With that said, Drupal is reasonably heavy weight, so your best choice is to set up the Linode then run some tests and see what load you can support. You can then decide if you need a larger configuration.
Oh, and in terms of billing, you shouldn't have any other charges unless you exceed your monthly bandwidth (which covers anything you transfer to or from the server), or decide to add extra services (backups, additional public IP address, etc..). But the costs for that are all published, so nothing unexpected should happen.
If it's tough to try to maintain a card prepared to accept a new charge from Linode, I believe you can also manually initiate a charge to essentially transfer funds into your Linode account. So you could get the prepaid card(s) when convenient, and manually let Linode charge the full card at once, thus building a balance in your Linode account which will get used over time, leaving you in control of exactly when the charging activities take place. Not sure this is all that more helpful, but at least it keeps you in control of the money transactions.
-- David
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