I remember there always being problems with outlook/hotmail setting up SMTP/POP(? forget which) settings. But you should be able to just select what's needed when you setup the account (MSN/Hotmail) and you plug in your information, good to go.
Quick search shows these instructions, which have worked for me in the past:
* Make sure you have an subscription for the Windows Live Hotmail account you want to access offline or an account with legacy access.
If you have Internet Explorer 7 installed, see below.
* Select Tools | Accounts... from the menu in Outlook Express.
* Click Add and select Mail....
* Enter your name.
* Click Next.
* Enter your Windows Live Hotmail address ("hmmzl34@hotmail.com", for example).
* Click Next again.
* Make sure HTTP is selected under My incoming mail server is a __ server.
* Now, select Hotmail under My HTTP mail service provider is __.
* Click Next.
* Enter your Windows Live Hotmail address ("hmmzl34@hotmail.com", for example) under Account name:
* Type your Windows Live Hotmail password under Password.
* Click Next.
* Click Finish.
* Click Close to close the Outlook Express accounts window.
* Now, select Yes to download the Windows Live Hotmail folders list in Outlook Express.