This is indeed the best approach, in my opinion. More broadly, think of the Machines themselves as being disposable. The platform overall is designed around that style, pretty much.
If your current fleet doesn’t fit the processing needs of the moment, then just destroy them and create new ones that do have the right CPU, disks, etc.
The only caveat is that it’s best to stay a little ahead of instantaneous demand, since Machine creation times have a ton of variance. Generally, it’s wise to have a few already on standby.
Also, the root filesystem is super-slow: throttled to ~8MB/s.
Recent commits to flyctl make it look like Fly.io might be planning some way to make it larger, but it still wouldn’t be suitable for processing large files…
Other things that people mention in this context are TigrisFS, NBD, and (now that’s been recently enabled) 9P, but those wouldn’t be great for 20GB bursts, I wouldn’t think.