Running Azure dev storage without an SQLExpress instance
November 29, 2011 -If, like me, you think the SQL Express named instance is a blight on humanity and refuse to sully your dev machine with it, you'll run into issues trying to start up Azure development storage: "Failed to start Development Storage: the SQL Server instance ‘localhost\SQLExpress’ could not be found".
The instructions here no longer work with SDK 1.5 - there's no DevelopmentStorage.exe.config. Instead, you'll need to run
DSInit /sqlinstance:.
(in "Windows Azure SDK\v1.5\bin\devstore"). This performs magic and your dev storage will start working.