Connecting to CRM 2011 in the Cloud is trickier than connecting to CRM 2011 On Premise.
Check c:\Program Files to see if you have Windows Identity Foundation. If not you will need to install it.
You need to get some device credentials and this is done using a utility in the CRMSDK called DEVICEREGISTRATION. Go to \sdk\tools\deviceregistration directory and load deviceregistration.csproj. Compile the application and navigate to the \bin\debug folder. Open a command window and type
deviceregistration.exe /operation:Register
