Say I have got a disk of radius $r$ and a plane $p$ in $3D$ space. The disk is "aligned" to $p$ and lies at an arbitrary distance, so that its orthogonal projection on $p$ is an identical disk of radius $r$.
Rotating the disk along one of either $x$ or $y$ axes will change the projection of the disk to an ellipse of greater radius $r$.
What will be the function describing the variation of the smaller radius of the projected ellipse due to rotation of the disk? Am I right to think it will be a parabola?
No. The length of the semi-minor axis of the projected ellipse will be $r*cos(\theta)$, where $\theta$ is the angle of rotation from horizontal and $r$ is the radius of the circle.