If you are encountering issues with the Live Mesh client install failing, you may want to download and install the latest Windows Update Agent files available via Windows Update. Some people have reported that the latest Agent is not being offered via Windows Update in all cases. And, if you normally update in a corporate environment where the Windows Update process is redirected to locally stored updates, you will certainly want to manually update the Agent.
The latest Agent is available via the Download Center through links in the KB article:
http://support.microsoft.com/kb/949104-steve
Microsoft MVP Windows Live / Windows Live OneCare, Live Mesh, & MS Security Essentials Forums Moderator