Update 2013 January 31: We can now create folder, Word document, Excel spreadsheet, Powerpoint presentation and Onenote notebook directly in SkyDrive in the free offering of 7GB space.
Old answer dated 2010 June 22: Not yet! The Hotmail folks communicated in an email notice few weeks back that we can work live on our MS Office documents by keeping them in the SkyDrive. But, at this moment we can only Create Folders, Add Files (Documents) and Modify Properties to Share the added files.
