If you are using Live Mesh beta,
www.mesh.com, you need to remove it and install Windows Live Mesh.
For peer to peer sync, the sync should work, but if Windows Live Mesh sees these files as different in any way, they need to copy over the network. On a local LAN this will still take quite
some time. If the PC are not on the same LAN segment, it would take considerably longer.
For discussion of the new Windows Live Mesh (formerly Sync), (as well as the released Live Sync version) go here: