I found this workaround worked for me. Hope it helps...
Apparently there's a known bug in the English versions of WLMail: if there are more than about 65 words in the custom dictionary, the Edit button at Options > Spelling doesn't work. The workaround is to locate the custom dictionary file, open it in Notepad and edit it there.
The file lives in %localappdata%\Microsoft\Windows Live Mail\Proof. Quickest way to get there is to copy this location into the search box that comes up from the Start button. Then click on 'proof' above and it will give you a list of your language codes.
The language code for my British English is lang0809. Double click to open, and when you get a box saying it doesn't know what to do with it, click on the option to select a program from the list of installed programs and then select Notepad.
You can then edit the word list and save on exit.
It just worked perfectly for me! Good luck.