If you had photos or images that were inserted into the posts on your Windows Live Spaces blog, you should find them within the posts on your new WordPress.com site.
Photos that are part of albums but not used in posts are not part of the upgrade process. Those images are still stored with Windows Live and you can find them by going to http://photos.live.com/ .
You can add a link to your photo album if you use Windows Live Writer:
If you would like to begin posting your photos to WordPress.com, you can start doing so at any time. The process is a little bit different from what you might be used to, and you can read about our Gallery/Slideshow features here: