Sorry, Movie Maker can't open this project file. The file might not be compatible with Windows Live Movie Maker or be corrupted.
If you are willing to wait, Microsoft will fix a corrupted file for you. I've also fixed quite a few files for people in the Microsoft Answers forums.
This post is for anyone that wants to know what is happening behind the scenes, or that wants to try to fix the problem on their own.
The first step is to make a copy of the file so you aren't working with the original. Next, right-click on the copy of the project file and choose 'Open With' and pick the Notepad application.
Scroll to the bottom of the file to find a <BoundPlaceHolders> section. It says that the "Text" section has an extentID of 4. Looking just above that you should see a section that starts with <ExtentSelector ExtentID="4" which lists all the added titles and captions by number. Make a note of all these because you'll need them later.
Now search further up for each section starting with <TitleClip. Ignore any sections that have a complete section between the <Effects> and </Effects> tags. Eventually you'll hit a few that just have <Effects/> (an empty Effects section).
Check if that ExtentID in the list of ExtentIDs in the Text section from before (the ones you made a note of). If it isn't you can ignore this, but if you find that it has an empty Effects section *and* it is listed in that block of text ExtentIDs, that's a problem.
Take the empty <Effects> line and replace it with a block of <Effects> ... </Effects> from a working title. I usually fill in the <BoundPropertyStringSet Name="string"> section with a recognizable string like "FIX ME!" so I can find it later. Most often, there is only one caption that is corrupted, so you might be able to stop here. However, you should check all <TitleClip sections to be sure. After replacing the empty Effects sections in all bad captions with good data, you can save the file.
You should now be able to open the project in Windows Live Movie Maker just like before. Look for any caption(s) that say "FIX ME!" and correct the position, text and styling as needed.
As a final step, I'd recommend downloading the latest version of Windows Live Movie Maker. Version 15.4.3555.0308 which was released in March has a fix to prevent this corruption from happening in future projects. It won't fix broken projects, but at least it will stop you from having this problem going forward. It's really not all that magical and can be done easily, if you are careful and only work in a copy.