hmm...mine still doesn't work....even with all the settings changed in hotmail and im using k9 mail client on my phone...
but i found something interesting in the article which provides pop3 & smtp settings for hotmail...this might explain why mine doesn't work and others if they think they are doing everything right and just can't connect to the smtp server.
"Windows Live blog
announced that Hotmail users in the United Kingdom, Canada, Australia, France, Japan, Spain, Germany, Italy, and the Netherlands are the first to enjoy the free POP3 and SMTP service as part of Hotmail wave 3 roll out.
Good news is, all Hotmail users should have POP3 and SMTP enabled and turned on in their account by end of 2009."