The use of dedicated roles depends on how many roles you want to run, and whether or not the memory usage of your web roles determines if they scale. For example, if your web roles are always pushing memory usage, and it is memory and not CPU that is the trigger for scaling out - then consider using dedicated roles for the cache, as your web roles can then handle the load for longer. If your web roles are cpu intensive, then dedicating memory on each role to the cache may be preferred. You also need to consider that if running in dedicated roles, you need more than one role to handle the load and availability, so even during non-busy times, you will have at least 3 roles running the cache (but possibly fewer web roles). You may also want to use dedicated cache if you do lots of deployments or scaling down - where roles are shut down intentionally and frequently.
One consideration on co-located role caching is that if you had sticky sessions the latency would be lower, as the item is on the same machine. Unfortunately, the Azure load balancer is round robin, and not sticky at all, so the chance that a session gets back to the same machine is low (1/5 of the time for 5 roles). This means that most of the time the cache item will be fetched from another role in the cluster, so co-located latency benefits are lost.
The cache is distributed and in-memory - there is no blob storage that I am aware of (except for 'cluster's runtime state' - whatever that is. An item loaded into cache is made available to other machines on the cluster from the machine that it is stored (in memory) on (a read from machine B to machine A does not also store it on machine A - see comment below). Cached items are always in memory only, and the cache size is limited by available memory.
The high availability option copies the item to a separate machine (not storage), so if one machine fails, there is still a copy somewhere. High availability will also use more memory, as an item uses memory in two different places. The chances of failure maybe low enough for your e-commerce app - if an item is not cached (either through failure or expiry) it may be reconstructed from persisted data. If you are, for example, keeping the basket in cache and not persisted to storage, you don't want it lost if a role recycles - in which case high availability may be the best option.
