I have been trying to install Live Mesh several times to my Windows Server 2008 -based workstation, but it keeps failing by claiming that the install is forbidden by system policy. Well, I took the time to actually look at the link the error message provided, and it suggested adding registry entry to modify MSI policy. So I went ahead and added DWORD value named DisableMSI, value 0 to this key (actually the "Installer" part was also missing so I added it as well):
HKEY_LOCAL_MACHINE\Software\Policies\Microsoft\Windows\Installer
And after adding this, Live Mesh installed with no problems! Great, now I can really use it on all of my machines!