Would I need it in order for my VB.NET 2.0 client service to perform those actions? Is the Azure SDK only for web development?
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Technically, no. The Windows Azure SDK is for writing applications (any type of app) that is to run on a VM in the Windows Azure cloud. Since SQL Azure is a relational database hosted for you on its own hardware, you don’t need to do anything special to develop against it (just use it like a normal database). Most ORMs seem to work just fine.
However, since you usually like to co-locate the data with the compute, it is likely you will want to run code in the same datacenter as your SQL Azure database. If that is the case, you will want the app that consumes SQL Azure to run in Windows Azure, in which case you need the SDK.
In short, developing against SQL Azure has nothing to do with the SDK, but it is necessary should you want to deploy your code to a running instance in Windows Azure.