If you recently installed WordPress 2.6 and is unable to use Windows Live Writer, don’t worry. The problem is that that by default WordPress disables xml-rpc and atom api. Windows Live Writer requires xml-rpc to be turned on.
You can turn on XML-RPC using WordPress dashboard from Settings -> Writing -> XML-RPC option. Refer to the following screen shot,
If you recently upgraded from 2.5.1, you would be wondering what the fuss is all about! Interestingly the above two options are enabled by default when you upgrade from 2.5.1 to 2.6.
You may be wondering why XML-RPC is disabled by default. XML-RPC is used by a lot of hacking tools built around WordPress trying to exploit security vulnerabilities such as weak passwords. So by disabling XML-RPC, a lot of current hacking attempts can be prevented.
But for external tools such as Windows Live Writer, XML-RPC is a must. So in the end it becomes a trade off between flexibility and security. But as long as you keep your WordPress installation updated and use strong passwords, chances of getting hacked is minimal.
Another interesting thing I noticed while configuring Windows Live Writer for a WordPress 2.6 is that WLW is unable to detect WordPress 2.6 installation and RPC configuration. I had to manually select the WordPress and location of the RPC php file as shown below,