No current problems with my two Hotmail accounts.
But, a friend of mine was not allowed into her Hotmail for several days last week. It kept rejecting her password. It also rejected her "secret question & answer". Upon contacting tech support, they issued her a new password, and everything worked fine. Hotmail just totally zapped her old password -- no explanation given.
Have you tried configuring your Hotmail account in Outlook Express ... just to see if that might work for you?
"In the End, we will remember not the words of our enemies, but the silence of our friends."
- Martin Luther King Jr. (1929-1968)