I downloaded and tried the Microsoft SQL Server Backup to Azure tool for SQL Server 2008. My goal was to get access to the backup compression functionality built into it. I have it configured to backup to a folder on the local computer (the same folder it backups to to normally.) Everything went smooth with the install and the setup. But when I try to backup a database to that folder, I get an error that the "Device cannot be found." If I turn off the Windows Backup To Azure service then I can backup to the folder without issue. So it appears that the tool is locking the folder and not allowing anything to access it.
I am running on a Windows 8 Professional 64 bit, with SQL Server 2008. I opened a bug with MS but haven't gotten any responses naturally. I am open to ideas from the community in general.