alter column size take very long time?

Assuming all previously-created columns are fixed-width like char and datetime, adding column C above just added it to the end of the fixed-width section of the record (effectively a meta-only change). However, recasting it as a varchar required it to be moved to the variable-width section of the record, forcing an implicit rebuild of the table. Paul Randal explains the internals of records in great detail in Inside the Storage Engine: Anatomy of a Data Record.

I tested the case. You can do it faster using below steps:

1. Create the same table structure with a different name (call it Tbl2)
2. Alter the column on Tbl2
3. insert data from Tbl1 into Tbl2
4. Drop Tbl1 (the old table)
5. Rename Tbl2 (the new one) to Tbl1

This will give you much better performance.

The reason is, altering the column on table containing data, will take a lot of data transfer and data page alignment. Using my solution you just insert data w/o any page reorganization.

Edit:
In my test, I used table with about 40 M rows, Table Size 7 GB and Index size 2.5 GB. The suggested method, was 1 minute VS 4 minutes when I used renaming the field in original table