OK... via some contacts, I have finally determined the following...

It's PO'ing a lot of people. It's known "bug" and not being fixed -- so
far.

I suggest people scream to get it addressed. Can you MVPs imagine what is
going to happen here in this NG when Joe Consumer with PAID or
(grandfathered) Hotmail/MSN access finds that IE7 update to XP, or Vista
install come January for consumers, kills their POP3 email -- and does not
tell them?!

If you add IE7 to an XP setup, you lose Outlook access to MSN/Hotmail POP3
accounts -- period. If you uninstall IE7, you can once again access the
account. So it appears to be a change introduced by IE7 interacting with the
authentication for the POP3 MSN/Hotmail accounts that causes the problem. I
have no problem with my other POP3 accounts, only my MSN access is broken.

The only way around it right now appears to be to use Hotmail Popper from
http://www.boolean.ca.

This is going to cause some waves... be prepared........................