I could not use Outlook 2007 to connect to HOTMAIL. However I found a solution:
Method 2: Modify the MSN POP3 account settings
1. Start Outlook.
2. On the Tools menu, click E-mail Accounts.
In Outlook 2007, click Account Settings on the Tools menu.
3. Select View or change existing e-mail accounts, and then click Next.
In Outlook 2007, skip this step.
4. Select the account that you want to verify, and then click Change.
5. Follow these steps:
1. Make sure that the E-mail Address field contains the correct account name.
2. Verify that the User Name and Password fields contain the correct information. The User Name field should contain your complete e-mail address.
3. Make sure that the Incoming mail server (POP3) field contains pop3.live.com.
4. Make sure that the Outgoing mail server (SMTP) field contains smtp.live.com .
5. Click More Settings.
6. On the Outgoing Server tab, make sure that My Server Requires Authentication and Use Same Settings as My Incoming Mail Server are selected.
7. Click the Advanced tab.
8. Make sure that both the boxes that indicate This server requires a secure connection (SSL) are selected. Make sure that Incoming mail port is set to 995 and Outgoing mail port is set to 25 .
In Outlook 2007, make sure that the This server requires a secure connection (SSL) check box is selected and SSL is selected in the Use the following type of encrypted connection list. Make sure that Incoming mail port is set to 995 and Outgoing mail port is set to 25.
9. Click OK.
10. Make any other changes that you want.
11. Click Next, and then click Finish.
this can be found here http://support.microsoft.com/kb/930008