As you can see from my previous post, Live Writer seems to be working nice with image posting. And I'm using Windows Live Mail client here to access my hotmail account (bah, a story to tell another day), my office account and my gmail account. Works well. Not bad at all. Although there are some rough edges in the settings UI, I didn't expect this good a job from Microsoft. So I'm impressed. And in recent news, I read that IE8 can render the Acid2 smiley. (FF3 can't, I just checked).
One of the things I read in the comments was a guy asking for a Bugzilla (not exactly bugzilla, but a open bug tracking site) where people can file bugs and track it openly and search other's issues when they encounter something themselves. I feel that this is strongly needed. Infact I feel that any software company that has a developer community owes it to the developer community for all the business they get in return. Like Office which is a microsoft stronghold, web is another microsoft stronghold which sells lots of windows and therefore gives them their strength in the market. They shouldn't forget the developers who are making it happen for them. Besides, its in their own good interest.
Some good stuff coming from MS. Keep it up!