If I stop the backup and retain the data, will it continue to age out per the retention period?
-Yes
I want to retain the data, but also want to ensure that it gets smaller over time.
-This depends on retention policy you've set. If you've defined short retention period, the backups will become smaller over time.
Is there a way in the Azure Recovery Services Vault to see how much backed up data is related to this physical server and if that number is decreasing over time?
-You can
configure Azure Backup reports