Usually, the exceptions thrown while debugging Windows Azure Table Storage is quite helpful. The message that I normally get is in the following form

"<?xml version=\"1.0\" encoding=\"utf-8\" standalone=\"yes\"?>\r\n<error xmlns=\"http://schemas.microsoft.com/ado/2007/08/dataservices/metadata\">\r\n  <code></code>\r\n  <message xml:lang=\"en-NZ\">SOME ERROR MESSAGE</message>\r\n</error>\r\n"

However, for the first time the helpful SOME ERROR MESSAGE turned out to be and an unhelpful "An error occurred while processing this request." ??!??!!

After a good night's sleep, it turns out to be a problem with the Azure Test Storage Table. As we all know by now, the local Development Storage creates temporary tables under SQLEXPRESS when debugging locally to simulate Table Storage in the Cloud. It turns out that the data I was trying to insert was greater than the 1000 character limit created for storing strings nvarchar(1000). 

By setting the data type to nvarchar(3000), the problem went away. According to the Windows Azure Table Storage whitepaper, string values can be up to 64KB.