I figured out the problem...when I went into the configuration settings, the address it's trying to use to connect is:
http://services.msn.com/svcs/hotmail/httpmail.asp
I checked out the address and it is not functional. So, I put a different address in - just a simple "http://www.hotmail.com" - and it worked but only once because it's not designed that way.
So, I know that my Outlook is connecting to something. They just have the wrong server address.