Window Live Movie Maker 2012 Error "The system cannot find the file specified" when clicking "add videos and photos" or trying to save movie.

I can only save the wmm file to a location but I can't save the actual movie to any format. Same error would pop up.

Drag and drop a clip into the wmm does work which is a work around for the "add videos and photos" option. However, i get the same error message when I try to save the movie to say a recommened movie format or any other format.

anyone know what the problem is ?