I have few existing Linux based VMs hosted on Azure that need to be added into a availability set. Since this setting configuration is allowed only during creation of a VM, I would like to redeploy the VM using ARM template (after updating the template with necessary availability set configuration).
My VMs only have OS disks (managed). Would redeployment of VM using ARM template preserve the applications that are installed on the OS drive or should they be reinstalled?
Yes. Azure Resource Manager (ARM) looks at resources and settings, not data. Just be aware of ARM Deployment Modes so it does not delete the entire disk. There is a great example on this page ARM Deployment Modes.