It makes sense that SkyDrive downloads everything because people don't know how to set it up. But, yeah, I missed the good old Mesh. I am just going to waste some SDD for photos. The SkyDrive Office is incredible though. Maybe they should have option to not sync photo folders? One can only dream.
A recent Skydrive update now lets you choose specific folders within Skydrive to sync. I hear they're next going to allow you to choose specific folders to sync outside of your main Skydrive folder as well.
Biggest missing feature though is still PC->PC sync without using the cloud. So, so much quicker when you're setting up a new PC already on your LAN and have several GB+ to sync, along with not impacting your bandwidth cap. Really hope the Skydrive team considers adding this back from Mesh, never made much sense to "replace" Mesh with Skydrive when Skydrive was a downgrade in many aspects (the web interface is great though).