Do you have Https enabled on the Hotmail web-mail site? The Hotmail extension requires this to work.
One thing to note here is that Microsoft, in the past, has rolled out different versions of their software at runs the Hotmail service on different servers. This has cause several different problems that the Web-mail Author had to work through and this maybe the same case here. If the Https is set to "auto" on the site and you still having please post a copy of the Hotmail log file; remembering to edit out your email address and password as many are able read the file and may access your account without your permission.
