Sorry to hear that you are having trouble with the Office Live Add-in. Here are a few things to try to resolve the issues:
1) Vista users: Please install this update to improve the performance of OLW on Vista. You are prompted to install this udpate when you click "Edit" to edit an Office document so you can click "Already installed" if you get prompted after you install these bits
.http://www.microsoft.com/downloads/details.aspx?FamilyId=F8BC14E7-84CD-41B6-AA3A-5FE8985C78FB&displaylang=en
2) Clear your credentials: We are aware of a few issues with users being logged into Windows with a different Live ID than the one associated with your Office Live Workspace. To resolve this issue, you need to clear your credentials using these steps.
a) Click on Start->Control Panel->User Accounts->Manage User Accounts->Manage Passwords.
b) Find all the credentials marked with (.NET Passport) at the end and delete them.
c) Click OK
3) Click on Open from Office Live-> Sign in
4) Enter your Office Live WOrkspace Live ID and password (you may get prompted twice)
5) Now go back to Open from Office Live->Documents. You should be able to see the Documents Workspace in the File window showing your current documents.
Please let us know if this works for you. We are working on automating this process and fixing the issues that cause this behavior so this should be a temporary thing. I hope you will be able to use the Add-in successfully.
Thanks,
Kavitha