Essentially, if you use the “Add Service Reference…” feature in Visual Studio or svutil to generate WSDL for a service that is hosted on Windows Azure either locally or in the cloud, the WSDL would contain incorrect URIs.
The problem has to do with the fact that in a load balanced scenario like Windows Azure, there are ports that are used internally (behind the load balancer) and ports that are used externally (i.e. internet facing). The internal ports were showing up in the URIs.
Also note that this patch is not yet in the cloud, but will be soon. i.e. it will only help you in the Development Fabric scenario for now. (Will post when the patch is available in the cloud.)
While we’re on the topic of patches, please see the list of patches related to Windows Azure.