Email Failure notices on Windows Live Mail

I have received hundreds of mail failure notices over the last three days. Some are on junk and some in the inbox.  I have been on Microsoft chat and they have not been able to fix it.  I have reset the password, and used systems restore.  I would like to just delete my contacts list.  Many of them I no longer need.  Every time I press the delete X I get a box that says The contact will also be deleted from Hotmail, Messenger & others. . .  When I press okay nothing happens.  I am using Windows 7.  Can someone please tell me what to do.