I've been trying this out every day or so since I'd heard about the update (originally named the July 2011 Service Release), but I'd forgotten about it for about a week. So I don't exactly know when this happened on my SQL Azure server. But tonight, around midnight, SELECT @@version returns:

Microsoft SQL Azure (RTM) – 11.0.1465.26 Aug 10 2011 22:54:49 Copyright (c) Microsoft Corporation

So cool, we're at Denali on SQL Azure. Or are we just on Denali spatial (which was the new feature that was mentioned in the announcement). Or, where are we?

First to try some T-SQL Denali features.
  The new THROW statement works, as does OFFSET and FETCH, but…
  Creating a sequence fails, as does LAG/LEAD and EXECUTE WITH RESULT SETS
 
How about spatial? Not trying to be tremendously rigorous for now, I tested some obvious things.
  The new HasM and HasZ properties work, as does the new ShortestLineTo method. Probably some other methods (like the new ST-methods on the geography type) do too.
  The items that were caught by sys.dm_db_objects_impacted_on_version_change WERE affected by the change.
  A test of the new spatial precision indicates that the Denali improved precision is being used but…
  Cannot create a FULLGLOBE type or a CIRCULARSTRING type
  The new AUTO_GRID indexes are not supported
  Attempting to use geometry::UnionAggregate produces "A severe error occurred on the current command. The results, if any, should be discarded."

And BTW, both SSMS from SQL Server Denali and SQL Server 2008 R2 SP1 connect to the updated SQL Azure version just fine. I don't have any earlier SSMS versions to try right now.

Hmmm…well that's kind of a mixed bag now, isn't it? I know we're not in Kansas anymore, but we're not all in Denali either. I'm sure someone will come up with a feature matrix for this SQL Azure version (or I will), but there's enough of a subset of new features to make it interesting. More info as it arrives.

@bobbeauch