Live Mesh team had issued an urgent warning earlier this week, the team have released an update that fixes the issue:

Fixed issue where deleting a Live Mesh folder on one device, or stopping the folder from synchronizing on that device, would cause the folder to stop synchronizing on all devices.

They also note about if you have been affected by this:

If any of your Live Mesh folders have been affected by this issue, please use the following steps to re-establish stable sync relationships for those folders:

1. Update the Live Mesh software on all of your device to the newest version.

2. If any affected folders are currently set to synchronize with your mesh, please stop those folders from synchronizing on each of your devices.

    a. Right-click on the folder and select Live Mesh Options, then click Change Sync Settings

    b. For each device, under Synchronize files, select Never with this device.

3. Once you have removed the affected folders from your mesh, you can then add them back in again by right-clicking the folder and selecting Add folder to your Live Mesh.