Thank you for the additional information provided.
I checked the provided project and the web.config and they look correct, also the version is properly referenced. Therefore I would ask you test the following:
1.On your dev machine remove all references to Telerik.We.UI;
2.Copy Telerik.Web.UI assemblies in the Bin folder;
3.Re-add references to Telerik.Web.UI by browsing the assemblies copied in the Bin folder;
4.Test to deploy to Azure again following the respective article and let us know about the result: http://docs.telerik.com/devtools/aspnet-ajax/deployment/deploying-to-azure
Meanwhile we will test the case locally deploying the project to Azure and will let you know about our findings.
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