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You are correct, IKE V2 is a requirement for setting up a VPN to Microsoft Azure supporting both Site-to-site and Client-2-site and Dead-peer-detection. (Azure VPNGateWay for support both site2site and client2site, also support for Dead-Peer-Detection on Azure site).
Please see info from Microsoft: http://social.msdn.microsoft.com/Forums/windowsazure/en-US/3750c999-6424-480c-a12b-520be62c5ffc/sit-...
There is a feature request already been submitted for the same:
Subject: IKEv2 Support (to Support Windows 7 VPN Clients)
FR ID: 1683
If you need further information on this, I would recommend you to get in touch with your Palo Alto SE.
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