Add MS SQL Server to virtual machine in Azure
SQL Azure Transparent Data Encryption is possible, but it is currently still in preview.

If you do not want to accept the supplemental terms of use for this then you can simply install SQL Server on the VM you just created or provision a new machine and use one of the numerous pre-built images that are available.

I would recommend you simply spin up a new machine as it is relatively painless, offers configuration by Microsoft, and ensures you have a SQL Server License since it is bundled with the VM image's pricing.

If you install software on a standalone VM you need a license for that software since the basic VM image is likely priced for and only includes a Windows license. There are a lot of plans and maybe you have a MSDN license... you'd have to check the details that pertain to your situation/subscription etc. to know that aspect of the decision for sure.