Question about Outlook Express

I have been getting emails that keep telling me my Hotmail account has expired.  They give a link to update and keep my account.  Is this a con spammer or is this from Hotmail.  Here is a copy and paste of the actual email....

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Security Alert,

Dear Customer,

Your Hotmail account has expired. You must renew it immediately or your account will be closed
or wouldn't be able to send or receive mail.

My wife's Windows Vista system crashed badly -- hard disk died, computer itself was mostly fried.  I was able to get a company to recover the disk contents, or at least most of them, and now I'm trying to pull in the main things she cares about from the recovered disk.  My machine is Windows System 7, and I'm working from my machine. 

For reasons that date back to the pre-Hotmail era, my wife uses a Hotmail account, but ran the Outlook client to download emails.  Then she saved them into various personal folders -- one for mails from her sister, etc.  Those folders were local to her machine, so I assume they are now on the recovered disk.  I do see some very large files with names like WindowsMail.MSMessageStore.

Can anyone suggest the obvious steps to (1) track down her contacts, and especially the outlook "groups" that she had defined.  As you probably know, Hotmail itself doesn't understand groups, so those groups were represented in her Outlook contacts on her machine.  (2) Recover those old emails from her family.

Obviously these days one would be wiser to keep those kinds of email folders up in the cloud.  That's clear now.  But the first step for me is to recover them off of this recovered disk!  Thanks...

Sometimes when I email people, I get this message:

This is an automatically generated Delivery Status Notification.

Delivery to the following recipients failed.

This excludes MSN and Gmail users. Im not sure why this is going on, but I need some answers.