The mashup didn't go smoothly. Microsoft had naming problems -- the combined product went from Mesh to Sync to Mesh again. Then there was the storage limitation. At first Microsoft said storage would be limited to 2GB, then to 5GB. Typical Microsoft marketing nits.
The big problems go far deeper.
This new Windows Live Mesh doesn't support Windows XP. Full stop. If you have an XP computer that you want to include in your sharing and syncing, you have to use a competitive (some would say "better") tool, such as DropBox.
The new Windows Live Mesh doesn't work with Windows Mobile -- you can't mesh with a phone. It doesn't have an API, so developers can't fix Mesh's problems. Migrating from the old Sync or Mesh to the new Mesh is fraught with problems. Windows Live Photo Gallery doesn't do Mesh. Gallery users are stuck in a disconnected parallel universe.
Which brings me to the biggest problem of all: the storage disconnect. Windows Live Office/Office Web Apps and Windows Live Photo Gallery both use Windows Live SkyDrive for their storage. It's easy to stick a file in SkyDrive, change it with an Office Web App, then pull it back down to your PC, for example. Upload a photo with Windows Live Photo Gallery and it goes into SkyDrive no sweat. But heaven help ya if you want to open a Mesh file with an Office Web App, or touch it up with Gallery, or attach a Mesh file to a Hotmail message.
SkyDrive and Mesh are completely separate. They're both cloud storage. Both from Microsoft. Both accessible via a browser. But when it comes to working with files ensconced in each, they're on different planets. SkyDrive is SkyDrive and Mesh is Mesh, and never the twain shall meet.
Microsoft has three completely independent cloud storage systems, and they don't talk to each other, much less work with each other. Windows Live Hotmail offers unlimited storage. SkyDrive has 25GB. Mesh has 5GB. Why? What were they thinking?