An admission right off the bat: I’m not a Toolbar user.  I guess I’m partial to as much browser real estate as I can get, but I don’t generally install any toolbars, from Windows Live or anywhere else.  That being said, if you have the Windows Live Toolbar installed and are having issues with syncing your Favorites across computers, John Pollard, a Senior dev on the Live Search team, thinks he’s found an answer.  From his blog post:

I had no idea what the problem was, and was going to try the trusted uninstall/reinstall route, but when I went to the uninstall control panel I realised I still had the old Favorites toolbar add-in installed:

John uninstalled the old Windows Live Favorites for Windows Live Toolbar, and his sync options re-appeared on his (new) Windows Live Toolbar.  In one case he needed to re-install the new Toolbar, but after that everything worked.

So if you’ve had problems, make sure the old Live Favorites is uninstalled.

Also, if you’ve tried to install Windows Live Sync and have been getting a network error, there is a fix for that.  From a comment (from Rachel Popkin MSFT) on the Windows Live Sync blog:

The issue you are experiencing should now have been resolved. To install Sync, please try the following steps:
1. Visit https://sync.live.com/clientdownload.aspx and select the Windows client
2. Save the program to your computer (Desktop, etc.)
3. Run the installation
4. Once the installation is done, run Sync from the Windows Live folder in the Start Menu.

Rachel also comments that there is a new Mac client, so if you’re having issues on a Mac, make sure you have the latest version.