The settings you have are the settings I use, and they've been working fine for me (for months now). I have to wonder that it's not a Thunderbird problem. Thing is, I POP my Hotmail account mail to Gmail now instead of using Thunderbird (though I still occasionally access the messages via Tb--several other accounts setup there). You may want to try something similar if only to test your account's support for POP/SMTP.
