You can configure Hotmail to work on the iPhone. It's working great on mine!! You have to upgrade to a Hotmail Plus account (although, apparently they will be offering POP3 on free accounts, as well, sometime within the next year). It sounds like POP3 on the paid Hotmail accounts is something that was just "officially" enabled last week. I found an official announcement from one of the Lead PMs for Hotmail - take a look, here:
http://mailcall.spaces.live.com/Blog/cns!CC9301187A51FE33!44348.entry
I just upgraded my Hotmail account to Hotmail Plus yesterday and now my mail works from my iPhone (it was not working yesterday before I upgraded my account). Here are the iPhone mail settings I am using successfully (the email addresses and passwords are just examples, of course):
Account: On
*Account Information:*
Name: John Smith (note: enter your own name)
Address: example@hotmail.com (note: enter your full Hotmail email address)
Description: Hotmail
*Incoming Mail Server:*
Host Name: pop3.live.com
User Name: example@hotmail.com (note: enter your full Hotmail email address)
Password: password (note: enter your Hotmail password)
*Outgoing Mail Server (SMTP):*
Host Name: smtp.live.com
User Name: example@hotmail.com (note: enter your full Hotmail email address)
Password: password (note: enter your Hotmail password)
*Advanced Settings:*
Incoming Uses SSL: On
Outgoing Uses SSL: On
Authentication: Password
Delete from Server: When removed from Inbox (or your preferred option)
That's it - I hope everything works for you, as well. Good luck!
- Dohsane