Recently i started digging into Windows Azure. When i started my first project i ran into an issue. I did not had SQL Express 2005 on my machine instead i had SQL server 2005 full edition.
Azure seems to be configured to SQL Express in CTP. This needs to be changed to SQL server 2005 connection string.
I did a change in DevelopmentStorage.exe.config at C:\Program Files\Windows Azure SDK\v1.0\bin
After changing the connection string and dbServer it started working fine.