I am now testing Windows Live Writer with this blog and uploading images because I was having image upload issues here. This is my official test post to do so. I did check my server and played around with some of the permissions so we will see what happens.
So here it goes.
No go. I think it has something to do with WordPress 2.1 or something. I will send my info to Microsoft and let them check on it. In the mean time it is FTP instead.