SQL Azure Transparent Data Encryption is possible, but it is currently still in preview.
I would recommend you simply spin up a new machine as it is relatively painless, offers configuration by Microsoft, and ensures you have a SQL Server License since it is bundled with the VM image's pricing.
If you install software on a standalone VM you need a license for that software since the basic VM image is likely priced for and only includes a Windows license. There are a lot of plans and maybe you have a MSDN license... you'd have to check the details that pertain to your situation/subscription etc. to know that aspect of the decision for sure.