Photoshop Elements v.7 is old now, we are up to v.10, waiting for v.11.
V.7 was developed before Windows Live Mail became available.
Suggest that you save the picture file after enhancing in PSE.
Save 2 copies: Copy 1 as you do normally. Copy 2 via File>save for web as JPEG
Send the file (copy 2) via Windows Live Mail as an attachment.
Then, delete Copy 2, if you wish
PSE11 is now live. Try your scenario on trial version from here-
With PSE7, you can try sending emails from either Microsoft Outlook or from Adobe Mail services. To opt either of the options, you need to select the option from 'Edit->prefrences->Sharing->email client'.
Please let me know if face any issues with this workflow.