I want to test how my instance performs with smaller RAM/processor (on DigitalOcean). I think on DO this means I have to destroy it and created a new one.
Just make sure my Cloudron backups are not on the same disk, install new instance and follow app restore procedure, right?
Yes that is correct, follow the instructions at https://cloudron.io/documentation/backups/#move-cloudron-to-another-server
Please not to not destroy the old server until the new works, you can just shut it down temporarily as mentioned in the docs.