This error drives me crazy and I can\'t even reproduce it!
I\'ve published my website to Windows Azure and SQL Azure and it worked great. All the sudden and it doesn
I know this is a really old post, but I just battled with the same issue...
I had the same issue and although I don't understand it, I have found that if I am currently logged in (on my site, not Azure console), I need to log out and then back in again and this database error goes away. It makes no sense to me, but it is what works for me after I deploy. I have had many times where I have deployed and everything works great (no need to logout/login). Sometimes it jumps into this mode. Not sure what is going on there.
It has nothing to do with the connection strings in your web.config - they are all being transformed properly.