I encountered the same problem, and there's probably a technical solution, but I haven't found one on any MS forums, and I'm not paying $50 for live support. In my case I already had a Windows ID (a hotmail account) and I also received same error message. The only work-around I could figure out was to create a brand-new Windows Live ID - in other words, a new email account using "@live.com" convention. Worked after that. Now I'm just trying to figure out how to delete the Activity Reports on familyfilter.live.com. Good luck.