You should try doing a clean re-install of Windows Live Messenger first of all.
Go to Control Panel > Add/Remove Programs then to Windows Live Messenger, press "Change/Remove", then remove the software. Then navigate to C:\Program Files\ and delete the "MSN Messenger" folder.
Next, restart your computer and go to
http://get.live.com/messenger/overview and download the latest version of Windows Live Messenger. Now re-install and start over again.
If you're having such a major issue with sharing folders, why not turn them off and accept files as you normall would through the old versions of MSN Messenger?
