I'm going to assume that you are using Outlook Express, though you mention it nowhere in your post.
Hotmail has stopped allowing OE to be used with free accounts to try an encourage people to pay for the service of e-mail. If you still have it set up from before they implemented it currently still works, but there is no way to add new accounts or modify old ones.
My suggestion: gmail, larger server storage and works free with OE.
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