Outlook login failed, error code?

So, I set up Outlook thinking it was going to be a total game-changer, but man, was I wrong. It’s been a bit of a letdown so far.
I punched in all my credentials for my Hotmail account, but for some reason, it just refuses to connect. I keep getting hit with this "login failed" error message, even though I’ve double-checked everything—username, password, the whole nine yards. They're definitely right.
And get this, it’s doing the exact same thing with my other Hotmail account too.
Anyone have any idea what might be causing this headache?
Here’s a shot of how my settings look in the properties window.

Did you set up your account this way?

I'm a bit stuck here. After I click ADD , instead of seeing that third step window 'Let me configure settings myself', it just jumps straight to the fourth step—the one where you're supposed to pick between Hotmail, Google, and the rest.
I'm running version Outlook plus 2.5

hmm, maybe you just need to go into those Hotmail settings and actually enable POP or IMAP so you can start using outside apps, like Outlook or whatever...

Man, if only I actually knew how to get this thing configured properly.
Is there anyone out there who actually uses AOL Instant Messenger and can walk me through how they set everything up?