1st. Be sure to have the latest class files.
2nd. Connection refused means hotmail is refusing your connection, try:
"telnet smtp.live.com 587" from your server (shell), you should see:
Trying 65.55.172.254...
Connected to smtp.live.com (65.55.172.254).
Escape character is '^]'.
220 BLU0-SMTP78.blu0.hotmail.com Microsoft ESMTP MAIL Service,
If you dont get the above, then probably you either have your ports blocked or your ip has been blcoked by smtp.live.com.
If you do receive the Connected to.., then it's your smtp config, try this:
        
        $smtp->localhost="localhost";
	$smtp->smtp_host="smtp.live.com";
	$smtp->smtp_port=587;
	$smtp->smtp_start_tls=1;
	$smtp->smtp_direct_delivery=0;
	$smtp->smtp_exclude_address="";
	$smtp->smtp_user="
[email protected]";
	$smtp->smtp_password="xxxxxxxx";
	$smtp->smtp_pop3_auth_host="";
	$smtp->smtp_realm="";
	$smtp->smtp_workstation="";
	$smtp->smtp_authentication_mechanism="";
	$smtp->smtp_debug=0;
	$smtp->smtp_html_debug=1;