Its true, you can now have you hotmail or Live email address work on your iPhone! Super simple to setup and it works! Just tried it.
When you set up Hotmail in the e-mail program on your PC or mobile device, you may be asked for the following information:
POP server: pop3.live.com (Port 995)
POP SSL required? Yes
User name: Your Windows Live ID, for example email@example.com
Password: The password you usually use to sign in to Hotmail or Windows Live
SMTP server: smtp.live.com (Port 25 or 587)
Authentication required? Yes (this matches your POP username and password)
TLS/SSL required? Yes
More details on the page below!