Microsoft Live Folders was renamed Live SkyDrive earlier this week. It is still limited to 500MB of online storage. However, Microsoft added a drag and drop save feature. Unfortunately, this feature requires and ActiveX component. So, it only works when using Windows and Internet Explorer. And, you cannot drag and drop in the opposite direction (from Live SkyDrive to your PC).

Microsoft really needs to use WebDav to give it the kind of user transparency Apple's .Mac network drive has.