I agree with Monochrome that connection strings should be put in the Service Configuration, however there are situations where you need some configuration changes not related to connection strings that should be applied only when deploying to Azure. In a project of my own, for example, I needed some log4net configuration to change when deployed to Azure.
I found this article that explains how to make SlowCheetah work with a Worker Role project and Windows Azure. You need to make a small change to your Azure project file to copy the transformed configuration file.
<Target Name="CopyWorkerRoleConfigurations" BeforeTargets="AfterPackageComputeService">
<Copy SourceFiles="..\WorkerRoleName\bin\$(Configuration)\WorkerRoleName.dll.config" DestinationFolder="$(IntermediateOutputPath)WorkerRoleName" OverwriteReadOnlyFiles="true" />
</Target>
</Project>
You might have to tweak the SourceFiles attribute to fit your directory structure. But that's all there is to it.