This bug discusses this in detail: 
https://bugs.launchpad.net/ubuntu/+source/pidgin/+bug/316252
And the solution appears to be msn-pecan : http://code.google.com/p/msn-pecan/

I am now using Pecan and all is well.

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Cannot connect to MSN after realease of new MSN client
https://bugs.launchpad.net/bugs/316022
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