Microsoft quietly released an update to its Active Directory synchronization (DirSync) “virtual appliance” today – and now supports installations on domain controllers.
This has long been an issue for smaller organisations that didn’t have a server to spare for running DirSync on.
You can read more about the update here: http://social.technet.microsoft.com/wiki/contents/articles/18429.windows-azure-active-directory-sync-tool-version-release-history.aspx
NOTE: According to the Microsoft documentation this can only be done for development purposes. I am yet to ascertain from Microsoft whether this means customers who do this in production are supported or not.