After a sleepless night and hours of searching (and researching), I found out that my host has blocked access to xmlrpc.php. And this blockage is such that editing the .htaccess file which is the most common remedy of this 406 error didn’t solve my problem but rather gave a 500 Internal Server Error. If you have already tried disabling all your plugins, changing back to the classic theme, editing .htaccess and looking for trailing spaces without any access then you probably need to check this out:

Make a copy of your xmlrpc.php and save it as something else (e.g. myrpc.php) in your root wordpress directory. When asked by Windows Live Writer for the URL of the file, fill it in – http://www.example.com/wordpress/myrpc.php

And your WLW should now be configured easily!

Whether it solves your problem or not, do let me know.

Note: This post is composed and published using WLW.