I was using live mesh to sync my favorites, and some folders. I had to switch live mesh accounts and when I tried to use mesh with my new I got the following error
“This folder can’t be synced. It is already being synced, contains folders that are already being synced, or is in a folder that is already being synced. Please select a different folder or move this folder to another location.”
In order to solve this I deleted everything I could from the directory C:\users\<MYUSERNAME>\AppData\Local\Microsoft\Windows Live Mesh
Then I stopped and restarted live mesh. Then I had to setup what was synced, but I had no trouble after that.