Some additional info :
How can I share files with a user who is using a MSN Messenger or Windows Messenger
You cannot share files with contacts who are using MSN Messenger or Web Messenger or Windows Messenger. In order to transfer files, use the Direct File Transfer method by choosing the File menu followed by Send File to transfer the file through a direct file transfer method.
My machine is unable to defrag correctly. There is a Similarity table file that is causing a problem
This is a sparse file used for the Sharing Folders feature. If the defragmenting tool handles compressed files on NTFS file systems., the sparse file will also be handled correctly.
Can I integrate my own Anti-Virus scanner with the Sharing Folders feature?
Sharing Folders currently supports integration with Windows Live Safety Center Scanner only. It will scan all incoming files from your sharing buddies and keep you virus free. At this time, Windows Live Messenger does not allow you to replace it with you own virus scanner
If you have any additional questions or having trouble with using Sharing Folders feature please contact Windows Live Messenger support and choose Messenger to report the problem.