why does Incoming SMTP to Azure Windows VM go to C:\inetpub\mailroot\Queue\ instead of Drop\ ?

I have a VB.NET web app that needs to process incoming SMTP email from any Internet user.

I configured IIS and my Azure Windows server 2012 R2 VM end point, but when I send email from the Internet, it gets received in C:\inetpub\mailroot\Queue\ and not C:\inetpub\mailroot\Drop\ like it used to back when I ran the app on my own server running Windows server 2008 R2. 

Also, when the web app tries to access the .EML SMTP files from Queue\ it usually gets error "in use by another".

My understanding is the Queue\ is for outgoing SMTP that is delayed, and Drop\ is for all incoming SMTP.

How do I get incoming SMTP to go to Drop\ where it belongs?