AWS: Load Balanced or Single Instance

Should we use a multiple EC2 instance load balanced setup or a single EC2 instance that is more powerful?

The picture below shows a suggested process that might be able to help us decide.

Suggested process when choosing between
load balanced or single instance

Click here for the PDF version of the above picture.

Click here for more details on how to set up a single EC2 instance in AWS.

Click here for more details on how to set up load balanced multiple EC2 instances in AWS.
Click here for more details on how to develop backup/restore strategies for load balanced multiple EC2 instances in AWS.