I\'ve been trying unsuccessfully to enable gzip HTTP compression on my Windows Azure hosted WCF Restful service which returns JSON only from GET and POST requests.
Yes, you can choose the OS you want, but by default, you'll get the latest.
Compression is tricky. There are lots of things that can go wrong. Are you by chance doing this testing behind a proxy server? I believe IIS by default doesn't send compressed content to proxies. I found a handy tool to test whether compression is working when I was playing with this: http://www.whatsmyip.org/http_compression/.
It looks like you have doDynamicCompression="false"... is that just a typo? You want that to be on if you're going to get compression on JSON you return from a web service.