I found the below and it fixed my wlm issue:
Close Windows Live Mail.
In the registry under
Computer-HKEY_CURRENT_USER-SOFTWARE-Microsoft-Windows-Live Mail
create these 3 DWORD entries (i did not have them) or change them to 1 if available
RecreateFolderIndex=1
RecreateStreamIndex=1
RecreateUIDLIndex=1
Restart Windows Live Mail. After that, the message display at me goes back to normal and the 3 values in the registry are reset to 0. Can be left like this.
For me, the account display in WLM with multiple accounts was also corrupt after the Windows Update 2004. This is also fixed.
I would recommend exporting a copy of your registry ahead of an editing, and only edit if you are comfortable doing that.
Thanks