Where are you typing in the email address and password? During initial subscription activation or is this a reinstall?
Typically, you can get this for two reasons:
1. The LiveID is correct, the password is not. Reset your password at http://account.live.com or use a different LiveID to activate the subscription.
2. The password for your LiveID is longer than 8 characters, which is valid, but the OneCare activation server can't deal with it. Change the password at http://account.live.com
You can exclude any file or folder from being scanned by OneCare by going to the Virus and Spyware tab in OneCare/Change Settings and clicking the Exclusions button and adding locations or specific files to the list for OneCare to not scan. You should, however, report this as a possible "false positive" per the instructions here:
http://forums.microsoft.com/WindowsOneCare/ShowPost.aspx?PostID=662566&SiteID=2
-steve