Realistic costs for Azure storage?

Ok where to start...

Due to your need for versioning, what you require is Recovery Service Vault.
You have the option of using a direct agent or you could consider System Center Data protection manager(DPM) that has the option to use the vault for storage. DPM can also utilize local storage to allow local retention for faster recovery.

Now connecting azure storage via ISCSI to onprem, this is not something you can achieve with out doing some out of the box thinking, like having a windows server in Azure with a large enough VHD (current max is 4TB, so you would need alot) and then using that server as a ISCSI initiator.... must i go on. 

Azure has cold storage for data at rest at almost no cost pr GB, but the restore activity you mention has me worried, perhaps you could give is a bit more information as to how time sensitive the restore mush be, how fast is the WAN link.