1. On Windows Live Messenger click Down-arrow (next to Minimize)
2. Tools
3. Options
4. Sharing Folders
5. Untick "Use a sharing folder when I drag a file onto a contact's name in my contact list"

Note: You can still send files via messenger.

1. On Windows Live Messenger Conversation window click Down-arrow (next to Minimize)
2. Actions
3. Send a single file