You have a problem with your firewall blocking MSN or Microsoft Live Messenger or Hotmail connection... or a problem with the NET framework.
Often this is caused if you are using the newer versions of Norton or Symantec Security Suite or firewall.
You need to look at your permissions and settings.
You have to manually unblock it or turn off the firewall... giving the firewall notice that MSN is to be allowed, along with Hotmail, and Microsoft messenger. You need to do some reading of sites related to IE 7 and firewalls.