If you want to connect to SQL Azure from SQL Management Studio follow the steps below:
It should be successful by now.
If you are not successful, check the following:
In my experience, few people had connecting issues connecting to SQL Azure from SQL management studio 2008 and majority of the issues were because of the firewall blocking 1433.
if you are in your office and if you are facing issues connecting to SQL Azure from SQL management studio 2008, it is worthwhile to check the firewall settings or check with the network administrator if the port 1433 is allowed in your corporate firewall.
Feel free to email me or leave a comment if you are facing issues.