apperantly this is a MS bug that was due to invalid (animated?) gif associated with live account.

1. to go msn.com and REMOVE your profile picture.

2. hold "windows key" and R, type regedit

    goto Hkey_Current_user/Software/Microsoft/MSNMessenger/PerPassportSettings/

    you'll see your account (in account id),delete everything there, yes, delete those folders.

 log in your live messenger, you should be good now.