Can you ensure that there is a 'Caching' folder under the location "%programfiles%\Microsoft SDKs\Windows Azure\.NET SDK\2012-06\bin\plugins"? Seems like the SDK Library was not installed on your machine.
If you are unable to find the 'Caching' folder can you install the appropriate WindowsAzureLibsForNet-(x64/x86).msi from the location
http://www.microsoft.com/en-us/download/details.aspx?id=29988 and try again (restart Visual Studio).
Just for our information , can you also share as to what was the source from which you installed Windows Azure SDK 1.7? Thanks