Thanks to Neil and Bryan, I’ve solved the problem I had and got Windows Live Writer working with MovableType now. When you set up a user in MT you set up a Web Services Password for each user. This is not the same as the one used for your standard login. The details can be found by going to the Main Menu, System Overview, Authors and then selecting your username. Down at the bottom is the information required with a reveal button to show the password. Thanks guys!