If you are using Windows XP home or Professional and you have upgraded to IE7 you might be in for a surprise. It seems that after this upgrade IE7 breaks outlook and hotmail’s (HTTP) authentication. This actually affects any HTTP-based mail server configuration.
When you try to configure Outlook or Outlook Express with a Hotmail account it will give you an authentication error like the one below when it tries to connect. Fortunately there is a fix to this issue you can either do a Windows Update which should include the patch fix in this article or you can download the patch below and install it directly. Once you do this the problem will go away and Hotmail will now authenticate with Outlook or Outlook Express correctly
While I’m a Windows user or as the new Microsoft ads say “I’m a PC” and I have been using Windows since back when Windows 3.1 was around I can’t understand why a company creates an operating system, then gives you a great program like Outlook, then gives you an upgrade to Internet Explorer that screws up a bunch of things on the computer all of this without testing it correctly. This has always been the case with Microsoft’s programs. Remember Windows ME, no one even talks about that failed operating system. Luckily they do respond in many cases quickly with a patch or fix to the problem. Below you can download the HTTP Authentication fix. I want to mention that this only affects Windows XP not Vista versions.
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Windows XP (HTTP) Authentication Fix Download :http://www.mediafire.com/?1mymoxijtjm