New versions have been released. Both v3.0.12 and v2.3.16 now take advantage of some recent bug fixes in TinyTDS v0.4.3 that will hopefully help lost connection issues. Thanks to @binarypaladin for helping debug this. TinyTDS is now also the default connection mode. So if you were relying on not specifying "mode: odbc" in your database.yml and having that work, please add it to be explicit.
And no joke, the v3 adapter now works with SQL Azure using the :dblib/TinyTDS connection mode. These pages cover all the details if you are interested. Many thanks to James K. Lowden for accepting my patch to FreeTDS that allowed DBLIB to specify a login packet make Azure usage via TinyTDS possible.
Using Azure: https://github.com/rails-sqlserver/activerecord-sqlserver-adapter/wiki/Using-Azure
Using TinyTDS: https://github.com/rails-sqlserver/activerecord-sqlserver-adapter/wiki/Using-TinyTDS
Enjoy!
Ken