Sorry for the delay. I didn't check back here for a reply, thought it would come to my inbox.
I have sent the debug log for a slightly different error message:
"API call error, The device is not ready.(80070015)"
but it is all the same issue. For one reason or another I can't sync into this folder.
I believe the cause of the "device not functioning" is that skydrive.exe won't let go of its LOCK file that it puts on the destination folder. But for this error, I have killed skydrive.exe and removed the .lock file.
For the benefit of search engines, I see that the log contains another error:
"API call error, An attempt was made to load a program with an incorrect format.(8007000B)"