We would need to open the IP range 70.37.*.* and 65.55.*.* for outbound ports 808,818,828,819,829,80,443.
Before your computer can access SQL Azure, you may need to create a firewall exception on your computer for TCP port 1433.
Why? - The whole idea of cloud computing is to have distributed system, where not a single piece of hardware serves. The IP addresses on the cloud are dynamic, and you can access services only by DNS name. What will be ip address is determined by sql.azure.com portal and <servername>.database.windows.net - this is the live production server. So you shall allow outbound traffic to all IPs for port 1433 or find a way to add oubound rule based on DNS name. This depends on each subscription so in a generic way, we should open TCP port 1433 for all IPs.
The software requirements can be found at http://www.microsoft.com/windowsazure/getstarted/ in the deploy step.
Quick suggestion: 1. Don’t think that even XP SP3 is not supported, you will be able to install the azure tools/SDK etc. The setup detects it and prompts to have either Win7/ Vista SP1/ WinServer 2008.
2. Make sure to allocate at least 2 GB memory to your VM. If you are working on the host itself, have 3 GB for a good response time.