I am exploring the idea of hosting my CD environment in Windows Azure. I read that the current release of the DMS does not play ball in the cloud, however, no detailed explanation was given. Apparently Azure support is planned for second quarter 2013, but in the meantime, I'd like to know why it doesn't work so that I can explore potential workarounds.
For instance, is the issue related to sticky sessions (or lack thereof)? Or, is it related to the DMS compatibility with SQL Azure?
It will be an issue with the sticky sessions. As the DMS does all its work server side it needs proper session state management to work. You could do this on Azure using IaaS, but then you would be responsible for installing and maintaining the deployment of Sitecore on the OS rather than using the built in deployment features.
See this post by Jakob Leander for more info: http://www.sitecore.net/Community/Technical-Blogs/Jakob-Leander/Posts/2013/01/Why-we-love-Sitecore-on-Azure.aspx