Live Mesh serice has an update for Windows 7 Beta (download link), the Live Mesh for Windows client update (0.9.3424.14) fixes the disabling of Aero support post the install of the Mesh Client. So to fix the below and get that Aero affect, install the update.

Fixes: Conflict-handling improved for duplicate files and folders, Live Mesh no longer disables Aero in Windows 7, Continued improvements to P2P synchronization, Minor usability improvements.

If you’re running Live Mesh on Windows Vista SP1 with UAC turned on, then turned it off, else you might have some issues upgrading.