While Octopus Deploy can do many things, in this particular scenario of yours, you're asking it to do three types of work - release management, automated provisioning and configuration management. It's a fine line between automation awesomeness and a really sticky situation.
Of the tasks you're asking, almost all of them can be done within Octopus today. I'd argue that it may be possible to Create a cloud service or VM. If there's some PowerShell cmdlet/library that allows you to spin up VMs with authentication, odds are you can do it Octopus - but it may not be the right tool to do that job today. Why?
In my opinion, it distorts the barrier between Developers, DevOps and SysAdmins. Whether you use Chef, Puppet, Salt, etc. whatever configuration management you have, that needs a whole layer of users with the expertise to back it up - often said expertise of system which the very developers who want such flexibility may not have. Secondly, right now this isn't a focus within Octopus (yet). I'd be hard pressed to say whether to use a tool such as Octopus on what it can do vs what it should do or not.
It's really nice that Azure now has support for preinstalling the Octopus tentacle for VMs. But that requires additional info such as, the Server thumbprint, port other supplementary configuration info in order to automate vm provisioning. That configuration management - should it be under Octopus's control, or something like Chef or Puppet? I honestly don't have an answer to this but my feeling as of now is not Octopus. Someday, perhaps, but until this is really ready and fully tested and vetted, I'd wait it out (a little) at least with Octopus.
If you're the adventurous type, then by all means try out Octopus. I may do a PoC (proof of concept) of this infrastructure automation later this year, but to rely on it today for business/production usage as the primary means of infrastructure automation will be risky and require a lot of work and experimentation. Again, I'm not saying it cannot be done, I'm questioning whether it should be done within Octopus as of this response today.
If anything, from the Octopus Deploy side of things is this feasible? Yes - it just hasn't quite been worked out yet. Looking at what you want to do, I'd say it's a two-phase process: 1. spinning up the new VM, attaching the tentacle to the environment and 2. running the deployment process on that new VM.
I'd also recommend checking out the Octopus blog. They're publicly talking about infrastructure automation. You can read about it here: http://octopusdeploy.com/blog/rfc-cloud-and-infrastructure-automation-support
I hope this response helps in some way.
