Windows Azure Graph AD Creating Group using Rest API

First, your request URI is incorrect. For creating a group using version 0.8 of the Graph API, it should be in this format:

https://graph.windows.net/yourtenantdomainname.com/Group

Your tenant might also be an *.onmicrosoft.com address. A couple other things: the service currently doesn't support setting the DirSyncEnabled or Mail properties. They are both read-only. And currently you need to have MailEnabled set to false and SecurityEnabled set to true.

To create a group using 0.8 version, this is what your request will look like:

POST https://graph.windows.net/yourtenantname.com/Groups HTTP/1.1
Authorization: Bearer eyJ0eXAiOiJK...vYiFqfkg
Host: graph.windows.net
Content-Type: application/atom+xml
x-ms-dirapi-data-contract-version: 0.8
Content-Length: 725

<?xml version="1.0" encoding="UTF-8" standalone="no"?>
<entry xmlns="http://www.w3.org/2005/Atom" xmlns:d="http://schemas.microsoft.com/ado/2007/08/dataservices" xmlns:m="http://schemas.microsoft.com/ado/2007/08/dataservices/metadata">
  <content type="application/xml">
    <m:properties>
      <d:DisplayName>testingGroup</d:DisplayName>
      <d:Description>Test group</d:Description>
      <d:MailEnabled>false</d:MailEnabled>
      <d:ObjectType>Group</d:ObjectType>
      <d:SecurityEnabled>true</d:SecurityEnabled>
      <d:MailNickname>firstGroup</d:MailNickname>
    </m:properties>
  </content>
</entry>

Note that 0.9 of the Graph API was released recently: http://blogs.msdn.com/b/aadgraphteam/archive/2013/03/03/0-9-version-of-azure-active-directory-graph-now-available.aspx

If you want to create a group using the latest version of the API, this is how your request would look using XML as the payload (note the camelCase properties and "group" in the URI):

POST https://graph.windows.net/yourtenantname.com/groups?api-version=0.9 HTTP/1.1
Authorization: Bearer eyJ0eXAi...YiFqfkg
Host: graph.windows.net
Content-Type: application/atom+xml
Content-Length: 627

<?xml version="1.0" encoding="UTF-8" standalone="no"?>
<entry xmlns="http://www.w3.org/2005/Atom" xmlns:d="http://schemas.microsoft.com/ado/2007/08/dataservices" xmlns:m="http://schemas.microsoft.com/ado/2007/08/dataservices/metadata">
  <content type="application/xml">
    <m:properties>
      <d:displayName>testingGroup</d:displayName>
      <d:description>Test group</d:description>
      <d:mailEnabled>false</d:mailEnabled>
      <d:objectType>Group</d:objectType>
      <d:securityEnabled>true</d:securityEnabled>
      <d:mailNickname>firstGroup</d:mailNickname>
    </m:properties>
  </content>
</entry>

And finally just for fun, if you want to use the new supported minimal JSON the payload would look like this:

{
    "displayName": "testingGroup",
    "description": "Test group",
    "mailNickname": "firstGroup",
    "mailEnabled": false,
    "securityEnabled": true
}