What is the difference in the "Host Cache Preference" settings when adding a disk to an Azure VM?

Just as the settings mention this setting turns on caching preferences for I/O. The effect of changing them is that reads, writes or both read/writes can be cached for performance. For example, if you have read-only database/Lucene index/read-only files it would be optimal to turn on read-cache for the drive.

I have not seen dramatic performance changes in changing this setting (until I used SQL Server/Lucene) on the drives. High I/O will be improved by stripping disks...in your case if you have millions of lines of code across 10,000s of files then you could see performance improvement in reading/writing. The default IOPs max for a single drive is 500 IOPs (which is about 2x15k SAS drives or a high-end SSD). If you need more than that, add more disks and stripe them...

For example, on an extra large VM you can attach 16 drives * 500 IOPs (~8,000 IOPs): http://msdn.microsoft.com/en-us/library/windowsazure/dn197896.aspx (there are some good write-ups/whitepapers for people who did this and netted optimal performance by adding the max amount of smaller drives..rather than just one massive one).

Short summary: leave the defaults for caching. Test with an I/O tools for specific performance. Single drive performance will not likely matter, if I/O is your bottleneck striping drives will be MUCH better than the caching setting on the VHD drive.

The most comprehensive post I've seen about the caching options is this Windows Azure Storage Team blog post by Brad Calder.

(Fixed link)