Comment 7 for bug 1055686

On a wild hunch, I built an image with a minimial initrd -- just the bits that are needed to boot -- and the system booted. This means that the problem is with the size of the initramfs.

On a default install the initramfs is ~4.5MB. However, if you install the linux-image-extras-virtual (requirement for Azure due to the need for the UFS module), that bloats the initramfs to ~19MB on the lastest kernel.

This means that the issue is likely the platform.

Here is the configuration for the initramfs that I used:
$ cat /etc/initramfs-tools/modules
sd_mod
scsi_mod
hid
hid_hyperv
hv_utils
hv_storvsc
hv_vmbus
hv_netvsc
crc_itu_t

$ cat /etc/initramfs-tools/initramfs.conf
MODULES=list
BUSYBOX=n
COMPCACHE_SIZE=""
COMPRESS=xz
BOOT=local
DEVICE=
NFSROOT=auto