Just for anyone stumbling on this thread in the future.
Today users of the WebDav protocol with Hotmail are being advised that this protocol will not be supported or available as of 1 September 2009.
As of that date Hotmail accounts in regular email clients, including Outlook Express, will need to use the free POP/SMTP servers provided by Hotmail. Users of Microsoft Outlook (2003 onwards) may download a "connector" that will allow them to use the newer proprietary DeltaSync protocol for Hotmail. Microsoft recommends for general users Windows Live Mail (note this is not the same product as Windows Mail originally shipped with Vista) which will allow the use of the DeltaSync protocol with any Hotmail account.
Just with a thought to the future. Folks wanting to have the upcoming avast version 5 scan their Hotmail emails will need to use the free POP/SMTP servers of Hotmail to make this possible (even with Windows Live Mail) - avast 5 will not be able to scan Hotmail accounts set up to use the DeltaSync protocol.