OK - we all know that Microsoft is messing with Windows Live.  Recently they changed the IMAP server and never told us.

I was able to fix this by using jFiredog's instructions - thanks!

NOW though I am having trouble sending messages!  I know the receipient are valid!  I haven't changed anything in my contacts and use these address all the time!  The error below was a result of sending my daughter, a saved contact, as message.  I've tried for 2 days and NOPE can't send it via Windows Live 2012.  HOWEVER if I open Outlook I am able to send the same exact message to the same exact contact.

I've seen a few other posts with the same type of problem so it's not just me!

Anyone have any idea of what is now happening?    Microsoft, shame on you, no communication and no help!  You really hate the fact that we are still using Windows Live via IMAP, aren't you?