And? Still blatant copyright infringement:

  "THIS SOFTWARE IS PROVIDED BY MICROSOFT 'AS IS'..."

One of the purposes of the BSD license is to give the original authors credit!

Microsoft is distributing a VM image of FreeBSD through their marketplace in binary format, that has been modified to be used on their cloud service. The license they choose to distribute it under is completely harmless, and you're still sure to find the FreeBSD licence details inside the OS itself once it's running.

There's no copyright issue here. Look at how literally any other VM image is distributed, on Amazon, GCS, Digital Ocean...