[fahadqureshi]

try this.
put a :587 at the end of the host name like this:

OUTGOING MAIL SERVER: smtp.live.com:587

and for advanced settings make sure incoming and outgoing uses SSL is set to on.

and also be aware that any settings changes you make might take a few minutes to work so if it doesnt work right away be patient and try again after 10-15 mins.