I'm having the same problem using these settings, and looking at the 
Windows Live Help, so are a lot of others. The password authentication 
fails.

watfordphil wrote:
> Try this:
>
> Here are the settings to access  Hotmail by using your desktop email
> client or your phone:
>
> POP server: pop3.live.com (Port 995)
> POP SSL required? Yes
> User name: Your Windows Live ID, for example [email protected]
> Password: The password you usually use to sign in to Hotmail or
> Windows Live
> SMTP server: smtp.live.com (Port 25 or 587)
> Authentication required? Yes (this matches your POP username and
> password)
> TLS/SSL required? Yes
>
> >
>
>   

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