Hotmail is lame like that.
I can usually get mail through by forging Outlook headers ..
//write mail headers and message sender
$from = "FROM: ".$sender." <".$sender_email.">"
."\r\nX-MSMail-Priority: High"
."\r\nX-Mailer: Microsoft Outlook Express 6.00.2900.2180"
."\r\nX-MimeOLE: Produced By Microsoft MimeOLE V6.00.2900.2180"
."\r\nContent-type: text/html; charset=iso-8859-1\r\n";