This behavior is observed in Azure Tools and SDK 1.6
I have an ASP.NET MVC3 project that is being used as a web role payload. After I create a service package I get a .cspkg file which I unpack and then unpack the .cssx file and in there I see "approot" folder and "sitesroot" folder and "approot" has exactly the same contents as "sitesroot\0" - the full set of files that are marked to be copied into output reside in both folders. The two folders are bitwise identical. All that stuff is copied into the service package twice. So if I add a one megabyte binary to my role the role get TWO megabytes bigger.