Alter table alter column causes huge log and data file growth

If you are a little adventurous, you could take matters into your hands by performing the ALTER TABLE in stages you can see. Suppose the table you want to change is called WorkingTable. You could perform the changes in stages like this:

#
#  Script 1
#  Alter table structure of a single column of a large table
#
CREATE TABLE WorkingTableNew LIKE WorkingTable;
ALTER TABLE WorkingTableNew MODIFY BigColumn VARCHAR(50);
INSERT INTO WorkingTableNew SELECT * FROM WorkingTable;
ALTER TABLE WorkingTable RENAME WorkingTableOld;
ALTER TABLE WorkingTableNew RENAME WorkingTable;
DROP TABLE WorkingTableOld;

You can perform this on all slaves. What about the master ??? How do you prevent this from replicating to the slaves. Simple: Don't send the SQL into the master's binary logs. Simply shut off binary logging in the session before doing the ALTER TABLE stuff:

#
#  Script 2
#  Alter table structure of a single column of a large table
#  while preventing it from replicating to slaves
#
SET SQL_LOG_BIN = 0;
CREATE TABLE WorkingTableNew LIKE WorkingTable;
ALTER TABLE WorkingTableNew MODIFY BigColumn VARCHAR(50);
INSERT INTO WorkingTableNew SELECT SQL_NO_CACHE * FROM WorkingTable;
ALTER TABLE WorkingTable RENAME WorkingTableOld;
ALTER TABLE WorkingTableNew RENAME WorkingTable;
DROP TABLE WorkingTableOld;

But wait !!! What about any new data that comes in while processing these commands ??? Renaming the table in the beginning of the operation should do the trick. Let alter this code a little to prevent entering new data in that respect:

#
#  Script 3
#  Alter table structure of a single column of a large table
#  while preventing it from replicating to slaves
#  and preventing new data from entering into the old table
#
SET SQL_LOG_BIN = 0;
ALTER TABLE WorkingTable RENAME WorkingTableOld;
CREATE TABLE WorkingTableNew LIKE WorkingTableOld;
ALTER TABLE WorkingTableNew MODIFY BigColumn VARCHAR(50);
INSERT INTO WorkingTableNew SELECT SQL_NO_CACHE * FROM WorkingTableOld;
ALTER TABLE WorkingTableNew RENAME WorkingTable;
DROP TABLE WorkingTableOld;

• Script 1 can be executed on any slave that do not have binary logs enabled
• Script 2 can be executed on any slave that does have binary logs enabled
• Script 3 can be executed on a master or anywhere else

Give it a Try !!!

Points, in no particular order:

• You do need the transaction log for a whole bunch of reasons I'm not going to go into. That said, if you're running out of transaction log space while you're in simple recovery mode, that probably means you have long-running transactions. Make your transactions as short as possible (gather all required user input before you start a transaction). (When SQL Server is trying to free log space, it can only free up to the start of the oldest current transaction.)
• Making NVARCHAR(MAX) columns nullable will not necessarily save you much space (off the top of my head it'll be 2 bytes per row, per column).
• Deleting/archiving old data will help you - with a caveat that it has to pass through the transaction log first.
• Shrinking your database will not help you, as a matter of fact it will kill performance (both while it's running and afterward, since DBCC SHRINKDATABASE uses a naive algorithm that almost perfectly fragments your indexes) and won't regain you much if any space.