How does the azure provider determine what resources need a delete/create instead of update based on parameters? i.e. there are parameters that I know will end up with a replace for a specific resource (moving from Consumption to anything else in APIM), but how does the pulumi azure provider know this (spoiler it doesn't know that specific semantic)

Microsoft has an annotation for this in Open API specs. However, the actual coverage is not great. We also have manual overrides in our code. It’s worth extending those and/or opening an issue upstream. Our overrides: https://github.com/pulumi/pulumi-azure-native/blob/master/provider/pkg/gen/replacement.go#L9