Try it with your firewall and Anti virus turned off, If it works you know its one of those.
If still ne good try,
Going to C: \ Program Files \ Windows Live \ Contacts \ and right click on the file wlcomm.exe then "Properties."
In the "Compatibility" tab, check the "Run this program in compatibility mode for" and select "Windows Server 2003 (Service Pack 1).
see if that works.