Check out this thread. I think WebDAV is installed on the Web Roles (cannot confirm it though). You have to RDP to the web role instance and check if this is the situation. If it is, you will need to create startup task to remove the WebDAV.
You can also check this and that articles on how to configure verbs in IIS via appcmd or vbscript (both can be executed via a startup task)
It appears that these things must be configured at Application Host config level, not allowed at web.config level.