A recent discussion at http://answers.microsoft.com/en-us/windowslive/forum/livemail-email/windows-live-mail-attachmnet-size-limit/04dfe5ec-d23b-47fa-bf08-4b11827e44ef?msgId=771257f4-28e8-4c9b-9d74-ff9c7d8d47bd finds there is not a size issue here.
With that out of the way, read
They seem to have solved it. You may not like the solution but unless you want to work with Microsoft, it is what I'd do next.
Sorry but I don't duplicate web content here. That would be duplicating the web. Do that too much and there won't be much space left.
I've had an issue with WLM not allowing me to send photos. Now it won't allow me to send any emails! I find them in the outbox and get the error code: 0x8CCC0003, whatever that is. I can receive emails fine. Yesterday I explored switching to Gmail and told Gmail to import contacts and emails from my WLM which wasn't done but might that have something to do with this or is WLM just so full of glitches that this type of stuff is not fixable?