Though they advertise & promote Azure as PaaS, you can actually use it for IaaS. They offer a Virtual Machine role which is the rough equivalent of an EC2 instance. I think most folks go the PaaS route though.
VMRole still isnt IaaS, since it doesn't have the equivalent of EC2's EBS backed instance storage. The Azure drive is close, but still not the same. So if you need persistence on the instance storage, you'll still have issues.
Very true. It is my understanding though that the primary use case of the VM role is to allow legacy applications to sit in the cloud without needing to rebuild for the Azure platform.
I hear it's coming though.