There are in fact 3 separate issues that need to be fixed here
resulting from the latest Hotmail site change, whenever you get around
to it:

1) By default, the user is no loner taken to the inbox when they log
in - this can be changed in hotmail as a setting but by default this
causes the webmail login attempt to fail.  If in hotmail the setting
is changed to take the user to the inbix on login, then webmail
correctly authenticates.

2) Messages are read, but not deleted from the server, even when
specified to do so.

3) Only the first 38 messages in each folder are read.

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