Remove peering between VNet1 and VNet2: Historically, Azure prevented address space modifications on peered networks, requiring the peering to be removed first. While newer updates allow address space changes while peered, the remote network (VNet2) will not recognize the new routes until the peering is updated. Since the "Sync" action is not an available option in this list, you must perform the manual equivalent: removing the peering connection.

Add the 10.33.0.0/16 address space to VNet1: Once the peering constraint is removed (or as the primary configuration step), you add the new CIDR block to the virtual network's address space.

Recreate peering between VNet1 and VNet2: Finally, you must establish the peering link again. When the peering is recreated, VNet2 will automatically detect the updated address space of VNet1 (including the new 10.33.0.0/16 range) and configure the necessary routing tables to allow communication between hosts.

A. Disassociating the NSG removes all its rules, permitting not blocking Internet access.

B. Inbound rules govern traffic entering the VM; they do not control outbound traffic to

websites.

D. The outbound deny rule already blocks port 80; no modification is required its scope

must simply include both VMs.

Microsoft Learn - Create, change, or delete a virtual network peering: "If you add an address range to a virtual network that is peered with another virtual network, you must sync the peering on the remote virtual network... If the peering status is Connected, you can't edit the peering settings [without syncing or recreating]."

Source: learn.microsoft.com/en-us/azure/virtual-network/virtual-network-manage-peering#resize-virtual-network-address-space

Microsoft Learn - Virtual network peering overview: Explains that address space changes require a peering update (Sync) or recreation to take effect.

Source: learn.microsoft.com/en-us/azure/virtual-network/virtual-network-peering-overview