CNAME record/alias in windows hosts file?
Solution 1:
The windows hosts file supports only ip->name mappings, it does not support any other standard DNS record types. See here:
http://technet.microsoft.com/en-us/library/bb727005.aspx#EDAA
I would recommend running a simple dns server in order to do the redirect you are talking about. Try powerdns http://www.powerdns.com/
Solution 2:
PowerDNS is not supported on Windows. I would recommend a tool such as "SimpleDNS" (14 day Trial) or "Technitium DNS Server" (free) which can be used to create a simple local DNS server.
Once you setup the program, you can create a zone and record for the CNAME you're trying to test and point your DNS server settings to 127.0.0.1 only to test.
I was able to use this to test TrafficManager and this looks to be the easiest way to do it on a Windows computer.