Windows.Storage.Pickers.FileOpenPicker.pickSingleFileAsync() returns StorageFille object whereas WinJS.xhr.send() expects a File DOM object. Essentially, what we need is way to get a w3c File DOM object out of StorageFile object. I found finally the method MsApp.createFileFromStorageFile() to do that.
I see that many of us need to upload images to azure blob containers. If you are one of us, it will help to know little bit more to help you better.