Are there types of files or folders that I cannot share or synchronize with Live Mesh?

Yes – read here.

I normally use Jungledisk for cloud-based storage but in certain scenarios Live Mesh is better: Sharing with others and when I have to synchronize files from a place where I do not want to use my JungleDisk encryption keys. JungleDisk encrypts data before they leave the computer.

BTW, I tested Live Mesh with an EFS-encrypted file. As it can read the file, it simply meshes the file up – so beware that you do not compromise security – and remember that Microsoft can read your data.

JungleDisk will not copy the file, but that may simply be a side effect, as JungleDisk runs as a service and thus does not have access to my EFS-decryption keys.