I mean, I assume that even if it behaves like a regular folder, unless the user actually wants to store the file on SkyDrive, then that folder would not be where they want to save the thing.
I actually even store most document-y stuff on Dropbox, which made Apple's whole "iCloud? Wanna save that on iCloud? Put it in the iCloud? What, Dropbox, you sure you didn't mean iCloud? iCloud? Hey, try saving it in iCloud! Look, iCloud! Woah, by Dropbox, I think you meant iCloud, right? iCloud? iCloud?" behavior so annoying...
I find Hotmail's password length terrible and its recovery process tedious.
There's no separate password. You log in to Microsoft/Live when you log in to your computer. If your computer is on, you have access to SkyDrive. If you forgot the password to unlock the whole computer, SkyDrive is not the top of your concerns.
That's not too bad if done that way. Although I hope I don't get locked out by someone trying to log into my outlook account. It got to be so bad with Hotmail I only use it as an email for my Xbox account.
The only password they need is the one to log into their computer.
But nixme's command-line tip above works to specifically fix the annoyance of having save dialogs always start with iCloud, while still allowing you to have it sync all that data.