Hi Tracey,
Sometime back, I too tried to add the code to the Live website but I was unsuccessful after several tries. As Live does offer some statistics which are useful in the Reports area, I just used this information, although this is not as detailed as GA.
These are the instructions I followed:
http://solutionsforofficelive.com/googleanalytics.aspx
In the end, I decided to create a new hosted website with a WP theme )still under construction), although Live has been a good alternative and I do recommend this free site. Just a side note to pass on...that if you should decide to move your site from Live back to a hosted site such as godaddy, this may not be possible using the ftp. This means that the Live website information would need to be recreated on a new website, manually. My host was not able to move the information citing that it can't be done using a Microsoft site.
Janine