After implementing the solution as described here:
I can not get the authorization to work once I turned on
config.SetIsHosted(true);
It always returns 401 Unauthorized. My custom API controllers or any anonymous method works as expected.
The issue is related to System.IdentityModel.Tokens.Jwt version 4.0.0 and it could either be a bug or a versioning issues as described here:
http://katanaproject.codeplex.com/discussions/568067
Also due to another bug in the latest version as described here:
https://github.com/Azure/azure-mobile-services/issues/325
We can't use Web API 2.2, so we need to downgrade to WebAPI 2.1.
In the end the solution is to get just the right package version numbers.
I could never get the latest version of WindowsAzure.MobileServices.Backend to work either so I had to downgrade that to the previous version.
Here is my package.config that shows all the packages and the version numbers that I finally got everything working on.
<packages>
<package id="Autofac" version="3.5.0" targetFramework="net45" />
<package id="AutoMapper" version="3.2.1" targetFramework="net45" />
<package id="EntityFramework" version="6.1.0" targetFramework="net45" />
<package id="Microsoft.AspNet.Cors" version="5.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.Identity.Core" version="2.0.1" targetFramework="net45" />
<package id="Microsoft.AspNet.Identity.Owin" version="2.0.1" targetFramework="net45" />
<package id="Microsoft.AspNet.Razor" version="3.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi" version="5.1.1" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi.Client" version="5.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi.Core" version="5.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi.Cors" version="5.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi.OData" version="5.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi.Owin" version="5.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi.Tracing" version="5.1.2" targetFramework="net45" />
<package id="Microsoft.AspNet.WebApi.WebHost" version="5.1.1" targetFramework="net45" />
<package id="Microsoft.Data.Edm" version="5.6.0" targetFramework="net45" />
<package id="Microsoft.Data.OData" version="5.6.0" targetFramework="net45" />
<package id="Microsoft.Owin" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Host.SystemWeb" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.ActiveDirectory" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.Cookies" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.Facebook" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.Google" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.Jwt" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.MicrosoftAccount" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.OAuth" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.Owin.Security.Twitter" version="2.1.0" targetFramework="net45" />
<package id="Microsoft.WindowsAzure.ConfigurationManager" version="2.0.3" targetFramework="net45" />
<package id="Newtonsoft.Json" version="6.0.4" targetFramework="net45" />
<package id="Owin" version="1.0" targetFramework="net45" />
<package id="RazorEngine" version="3.4.1" targetFramework="net45" />
<package id="System.IdentityModel.Tokens.Jwt" version="3.0.2" targetFramework="net45" />
<package id="System.Spatial" version="5.6.0" targetFramework="net45" />
<package id="WindowsAzure.MobileServices.Backend" version="1.0.342" targetFramework="net45" />
<package id="WindowsAzure.MobileServices.Backend.Entity" version="1.0.342" targetFramework="net45" />
<package id="WindowsAzure.MobileServices.Backend.Tables" version="1.0.342" targetFramework="net45" />
<package id="WindowsAzure.ServiceBus" version="2.3.4.0" targetFramework="net45" />
</packages>
Update
Even after upgrading all packages from the baseline that worked I could never get a successful upgrade, however I recreated the project from scratch and added everything back in and it now does successfully work at version 1.0.439. So I can say from this version that it is now working.