Question

Can I download an EC2 instance in vhd format? Or download it in AMI format and convert it to VHD?

Answer 1

Amazon EC2 has only provided VM Import at the time you posted your question still, but initial support for this long requested feature has finally been released on May 25 2012 as well, see the introductory post VM Export Service For Amazon EC2:

The AWS VM Import service gives you the ability to import virtual
machines in a variety of formats into Amazon EC2, allowing you to
easily migrate from your on-premises virtualization infrastructure to
the AWS Cloud. Today we are adding the next element to this service.
You now have the ability to export previously imported EC2 instances
back to your on-premises environment. [emphasis mine]

Please note that VM Import/Export is still limited to Microsoft Windows only though, specifically:

The service can export Windows Server 2003 (R2) and Windows Server
2008 EC2 instances to VMware ESX-compatible VMDK, Microsoft Hyper-V
VHD or Citrix Xen VHD images. We plan to support additional operating
systems, image formats and virtualization platforms in the future.

Hopefully the latter will be realized soon, as this would significantly increase EC2 versatility in general and for development scenarios in particular, more recent and lightweight DevOps approaches to the underlying deployment problem notwithstanding.