Thank you so much for this posting. I am a newbie to Android (just bought a Galaxy Tab, having been on Windows Mobile before that!!!). The beauty of your solution, as you say, is that it is simple, straightforward and comprehensive. And if set up properly, it works a treat!
However, I think you may have missed out something in your instructions - perhaps because it was too obvious. It concerns email synchronisation. In addition to moving your calendar and contacts to your new Hotmail-based folder in Outlook, you also have to move your email Inbox there - otherwise, email coming into your Outlook email client will not be replicated onto Hotmail, or from there onto your Android device. It will remain locally on your computer.
Second (and again apologies if this is too obvious to more experienced users), you can copy across to your Hotmail-based account not only your Inbox, but also any sub-folders you have created in Outlook. For me, this is crucial. I have a whole range of folders in which I file by subject/category incoming and outgoing emails. All these can be dragged across to your new Hotmail-based account - and will then appear on your Android device also. Brilliant! Just one warning: folders will not copy across if they contain any 'illegal' characters for Windows. These include: / ? ; " ' and many other you may use. Your best option is to rename all your folders to eliminate these characters before you copy it across.
One final point. If you want your emails to download immediately to your Android device even when you are away from your Outlook-based home computer, you need to set your Hotmail account to "send/receive from other accounts", using your home email account. This means that, even if you are not at your home computer downloading pending messages via Outlook these will download to your Hotmail account - and from there automatically to your Android device.
Apologies again if any of this is obvious to more techie-based people than I. My main point is: RazzMaTazz's solution rocks!!!