After installing the Critical Update for Windows Live Photo Gallery (Beta 2.2, build 12.00.1299.1010) via Windows Update, using the option Import pictures and videos in the AutoPlay dialog may cause the following error:
This file does not have a program associated with it for performing this action. Create an association in the Set Associations control panel.
This problem can be fixed by repairing Windows Live Photo Gallery using the following steps:
%Windir%\SoftwareDistribution\Download
After the repair process completes, the Import pictures and videos option in the AutoPlay dialog should work correctly.