Why is it showing this? every time i try to start sharing folders with someone, it gives the error..

In case you are sure you both running wlm and that the file format is appropriate, because sharing only work with NTFS system.

Then try this, exit from WLM by right clicking on the tray icon and click Exit.

Now in Start > Run. open the command prompt by typing cmd and type sc stop usnjsvc.

Now in Run again type  %appdata%\..\local\Microsoft\Messenger, and excute it.

In the new window double click the folder corresponding to your e-mail, then drag the ObjectStore folder to any other place you want (ex. desktop).
Then go Back within that window to get back to the Messenger folder, and delete all folders and files there.

Now, open wlm, after you sign in successfully go back to the previous folder were we moved ObjectStore out of it and replace the current one with the one we have moved away earlier.

Sharing should work now.