Since Microsoft is complete inept on this issue, i'll let you know what worked for me. I did lots of searching and the only answers I found were:
1) Completely uninstall or use the "Repair" function
2) Use system restore (which helped a lot of people)
My problem was that my client didn't have any restore points before the issue occurred, so I was stuck. First, make sure you backup your Windows Live Mail fully using KLS Mail Backup. You shouldn't need to use the restore function, but its good to have a
backup.
I read somewhere else of someone using ccleaner and revo uninstaller and fixed it where the first two options failed. I tried ccleaner on its own after a standard uninstall (without revo uninstaller) and it didn't fix it. I then reinstalled Windows Live
Mail (with all the other crap that comes along with it) and did a revo uninstall USING THE ADVANCED OPTION (the moderate option didn't work). Don't reboot when the built in Windows Live Mail uninstaller asks you to (I made this mistake once and had to reinstall
just to uninstall it again). It will find like 10,000 left over registry entries and a bunch of files to remove. Remove it all, THEN reboot. Then reinstall. Once reinstalled, the first time I started up Windows Live Mail it had to do a repopulating of the
clients mail folders. Everything seemed to be there afterwards and the problem was gone. Hope this helps someone.