However, since last week, I think nobody can connect anymore. The reason is that MS server started using see-other-host, which is perfectly standard (part of XMPP CORE), but not implemented into telepathy-gabble. I can’t really blame them for this since they warned developers twice, and even then, it became effective much later than they announced.
The problem is described and patches are available in bug #51033, it should hit telepathy-gabble master soon. I’ll also consider backporting to stable branch, but patches are a bit intrusive…
There is a 2nd problem with WLM’s XMPP server that sometimes prevent us to connect. This time it is really a server issue out of our control. I’ve sent all needed logs and MS devs are actively working on the issue. However, retrying to connect multiple times (which we do by default) eventually succeed after some attempts.
Last but not least, it is possible to ADD (not REMOVE, wondering why their server does not accept that…) contacts in your MSN account. But WLM server uses a non-standard trick for that, to convert a Live account (e.g. firstname.lastname@example.org) to a jid (e.g. email@example.com). The non-standard iq are described here, and telepathy-gabble patches are available in bug #50341 to make it work.
I’m happy this is not useless work, since we have now over 10 000 monthly unique users connecting to MSN with XMPP through gnome-online-account (I’m app key owner, so I get usage stats).
Edit: telepathy-gabble 0.16.1 now released with a fix for the see-other-host issue.