I am finding that the database collection contains no elements after logging into the "Target" SQL Azure step. The Migration Tool worked fine for me a few days ago and I verified my SQL Azure account is working fine as well at the master and other databases are working, online and I can connect to them.
It is failing on this second line with an index out of bound exception and no Database object is fetched.
Server svr = CommonFunc.GetSmoServer(dbServer.ConnectionContext);
Database db = (Database)svr.Databases[database];
ScriptWizard.cs - line 1171 - v3.7.7
It looks like an lightly documented release of SQL Azure that is the breaking change: http://bobthegoblin.wordpress.com/2011/09/11/sql-azure-migration-wizard-v3-7-7-red-gate-sql-compare-9-no-longer-work/