I read some of this thread before but didn't really get what you guys where doing because I hadn't tested out the new SkyDrive much yet. NOW I see what you mean.
I just opened up Ableton Live and most of my projects in the Recently Opened menu where greyed out and it was quite scary. (they're mostly backed up on an external drive though) To test out the SkyDrive client I uploaded a whole bunch of those project folders to SkyDrive but it's only now, a few days later, that I realised what it does.
IT MOVED all those files to another folder.
That really IS annoying. This is going to scare allot of people when they can't find their important stuff anymore.
Section31's ShellExtension looks promising but I'm not sure if I want to mess with this anymore.