My Hotmail account started the "negative vibes" "password not
accepted" baloney earlier tonight. I upgraded to the newest beta of
Webmail-Hotmail. That didn't work either; same error notices. However,
if you'll actually go to the Hotmail webpage and login, you'll find
that you'll get and information page telling you about some interface
changes that Hotmail has recently made. If you click "Don't show me
this next time", that page will not interfere with Webmail-Hotmail
operation anymore and your account will be able to be accessed from
within your client again.

Worked for me, anyway.

Luck!

~Eric

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