solution:

NOTE: If you are moving from DAV to POP3, there are a few important differences. With POP3, there is no synchronizing. For example, if you read an e-mail message in Outlook  the message will be unread if you view your Hotmail account on the web. Also, only messages in your Hotmail Inbox will display in Outlook. Other folders, and any messages in them, will not be displayed.

1. In Outlook, on the Tools menu, click Account Settings

2. Under E-mail tab, click New.

3. Choose Microsoft Exchange, POP3, IMAP, or HTTP and click Next.

4. Click Manually configure server settings or additional server types and click Next.

5. Choose Internet E-mail and click Next.

6. Under User Information type your name and email address.

7. Under Server Information:
    * Choose POP3 as account type.
    * In the Incoming mail server (POP3) field, type pop3.live.com.
    * In the Outgoing mail server (SMTP) field, type smtp.live.com.

8. Under Logon Information, type your Username as the email address and your password.

9. Click More Settings

10. On the Outgoing Server tab, select My outgoing server (SMTP) requires authentication check box.

11. On the Advanced tab, type the following information, and then click OK.
        Under Incoming Server (POP3): 
            Select the This server requires an encrypted connection (SSL) check box.  
            In the Incoming Server (POP3) field, the number 995 should display. If not, select the number and type 995.
        Under Outgoing Server (SMTP): 
            In the Outgoing Server (SMTP) field, type 25 or 587 for the port number (If port 25 has been blocked in your network or by your ISP, you can set SMTP port to 587)          
        Under Use the following type of encrypted connection choose AUTO (in Outlook 2007). If you are using Outlook 2003, choose SSL.
        Select the Leave a copy of messages on the server check box if you want to see your messages when you use Hotmail in a web browser, your mobile phone, or other e-mail programs. If you want to delete your messages from the Hotmail server after you read them, clear this check box. Click OK.

12.     Click Test Account Settings.
If the test is successful, click Next. If the test fails, check the values you typed in the previous steps.

13.     Click Next and then Finish.

14.     Take a look at the account settings by going to Tools in the menu and clicking Account Settings. If you see your Hotmail account with Type 'HTTP', select the account and click the Remove button (NOTE: this should apply if you are moving from the DAV protocol to the POP protocol - you've added an account with POP through the above instructions and now need to delete the previous account accessed through DAV).

From:  http://windowslivehelp.com/solution.aspx?solutionid=618dcd05-8494-4827-bba6-8072406b3fb7