You provided your own answer

You ask why is "Microsoft Hotmail" so bad at [insert pretty much anything to do with the Internet here].

The answer is "Microsoft." The arrogant fuckwits at Microsoft have *always* thought they could ignore existing standards, invent their own, and impose those inventions on everyone else by sheer force. this is a prime example of why no Microsoft product should ever be allowed to directly contact the Internet (e.g., there should always be a standards-compliant server between any MS crapware and the Internet).

Incidentally, MS Hotmail is not allowed to deliver email to *my* mail server, either. I got tired of all the spam they cheerfully forwarded to my customers, without, in over five years, ever *once* forwarding a legitimate non-spam email.

Hotmail can go stew in their own sewage. Google Mail is doing a good job, for a freemail provider. Hell, even Yahoo does a better job than Hotmail.