I don't know how you managed to get Windows Live Essentials 2011 as a priority or important update from Windows Update. It should be an optional one
downloaded and installed from the
Windows Live Essentials 2011 site directly.
This is the
Windows Live Essentials 2011 full offline install. (this is a direct link to the exe)
1. If you use the Windows Live Mail client in the previous version you will notice the new ribbon toolbar in the Live 2011 version. If it is not present you do not
have that specific component of Windows Live Essentials 2011 installed. The same goes for Windows Live Photogallery, they both have the new ribbon toolbar at the top. Can't miss it. Windows Live Essentials 2011, if installed, will be listed in the "programs & features" section of your control panel. If it is not listed, you do not have it installed.
2. Yes, use one of my links to get Windows Live Essentials 2011 and install the specific components you want to use.
3. Windows Live Essentials 2011 is an optional upgrade to the previous Windows Live,
for now, although you may have difficuly finding the older version on an MS website
in the future. I have installed 2 components from Windows Live Essentials 2011; Windows Live Mail & Windows Live Photogalley, ontop of the older version without any issue.
You should be able to remove/uninstall all entries from your Windows update screen relating to Windows Live Essentials 2011 and install them manually via the provided download links. Once you have done that, any nagging on behalf of Windows Update should cease. If they don't, then you have other issues in need of attention.
Office Live Add-in: No comment. I don't use it.