No you don't need to pay hotmail for anything. I'm using a free subscription and I have it working. After reading what I wrote the first time I forgot to mention that you need to select httpmail when you add the account. When I tried to use the POP selection it wouldn't work, so make sure you use httpmail.
Anyway, I created a word doc and a PDF of the steps I used to get the plugin set up. I would start out fresh by opening mail, going under the file menu and selecting add. Now follow the screen shots I created and hopefully everything will work out for you. Here's where you can get the document
http://kevinsserver.myserver.org/httpmail/
Hope this help get you going,
Kevin