Hi Melanie,
I have the same issue with embedded pictures (inline attachments). It shows the same problem on reply.
When somebody sends you an email with embedded picture - usually a logo of company in a signature - when you reply to that email, "onSend" Windows Live Mail reports an error: One or more of the pictures in this message couldn't be found. When you send this message these pictures will not be included.... "
I will appreciate when your senior team solve this issue asap. The problem exists from the time Windows 7 has been released.
thank you
PS. When I send message anyway, inline pictures are attached to the message as regular attachments - which looks quite silly for the recipient. I suggest you check this behavior in an non-hotmail/live/skydrive email POP3 account.