It is a bug in Windows Live Mesh. Since your source is located in a folder at the root of the drive, the destination folder cannot be chosen by you and it dumps it into the logged in user documents folder.
Since you are referring to Windows Live Mesh, not Live Mesh -
www.mesh.com, you are in the wrong forum. Yes, the naming convention is confusing, though I like that they kept the Mesh name alive for the upgrade to Live Sync (formerly FolderShare).
For discussion of the new Windows Live Mesh (formerly Sync), (as well as the released Live Sync version) go here:
http://windowslivehelp.com/forums.aspx?productid=24
-steve
~ Microsoft MVP Windows Live ~ Windows Live OneCare| Live Mesh|MS Security Essentials Forums Moderator ~