How can we import Hyper-V Penetrator Image to Microsoft Azure?

You need to set the Hyper-V Disk from Dynamic to static.

From: http://technet.microsoft.com/en-us/library/ee941151(v=ws.10).aspx

Shut down the virtual machine. Use the Edit Disk Wizard in Hyper-V Manager to convert each dynamically expanding virtual hard disk for this virtual machine to a fixed sized virtual hard disk.

Before you perform the following procedure, review the following considerations to help avoid problems.

Make sure you have enough free physical storage space to store the .vhd files of the converted disks. The .vhd file of each fixed virtual hard disk requires the same amount of space as the maximum size specified for the virtual hard disk when it was created. (In Hyper-V Manager, under Actions, click Inspect Disk to check the maximum size.)

Merge or delete all snapshots before you convert the disk. Failure to do so will make any remaining snapshots unusable.

The dynamically expanding virtual hard disk must not be used as a parent of a differencing disk. Converting a parent disk will render it unusable by all differencing disks associated with it.

By default, membership in the local Administrators group, or equivalent, is the minimum required to complete this procedure.
To convert a virtual hard disk

Open Hyper-V Manager. Click Start, point to Administrative Tools, and then click Hyper-V Manager.
If the virtual machine is running, shut it down. Right-click the name of the virtual machine, and then click Shut Down.
From the Actions menu, click Edit Disk.
On the Locate Virtual Hard Disk page, type or browse to the location of the fixed virtual hard disk.
On the Choose Action page, click Convert.
On the Convert Virtual Hard Disk page, specify a name and location for the converted disk.
On the Summary page, review the details and then click Finish.
Note
The virtual hard disk is converted when you click Finish to complete the wizard. Depending on the size of the virtual hard disk, the process can take a considerable amount of time.

Note the part where it says, "The .vhd file of each fixed virtual hard disk requires the same amount of space as the maximum size specified for the virtual hard disk when it was created."  

Do you have enough room for that?  That may be why you're getting the error.