The problem seems to be a bug in the Google Talk client which makes it crash whenever a contact has a percentage "%" sign in their e-mail address. As the MSN transport encodes e-mail addresses with a percentage sign, this effectively makes the client impossible to use with MSN. There's a bug report for it here, don't know why it is closed though...
Issue 1795 - android - Jabber crashes when user emails have a "%" in them - Project Hosting on Google Code