Is the folder you are synchronizing to on PC B a blue Live mesh folder? Are you merging data with an existing folder or is it a new folder and currently empty on PC B?
You may want to change the sync settings on the Live Desktop to not sync with PC B. When the folder reverts to a normal explorer folder icon on PC B, go back to the Live Desktop and change the Sync settings to sync with PC B again.
If this fails to make it work, please file a bug report with logs:
How to Submit Bugs and Live Mesh Logs
-steve
Microsoft MVP Windows Live / Windows Live OneCare, Live Mesh, & MS Security Essentials Forums Moderator