I found this "fix" and am passing it on.
Here's a way I fixed the broken mail filters after updating to Live
Mail/Essentials 2011.
1. Make sure all your junk mail settings are set up and saved the way you
want and close out of Live Mail.
2. Go to > Control Panel > Programs and Features > right click Windows Live
Essentials 2011 > click Uninstall/Change.
3. Select "Repair all Windows Live programs" in the dialog box.
4. After the repair is done, reboot when asked.
Your mail filters should work now.
Hopefully the techs will release a fix to the updater soon
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