The news articles on this suggest that they are making this change gradually and it won't be completely in place for all Hotmail users until next April. Guess I was just one of the lucky first accounts to get locked out.
Jamie, you seem to be right about the "hey - let's charge EVERYWHERE!" thing. Which, actually, I don't mind per se. This is capitalism after all.

But there is a good way of charging people and a bad way of charging people.
The BAD way, in this case, involves taking a service that used to be free, getting people to rely on it, then suddenly -- WITHOUT PRIOR NOTICE -- making it stop working until they started paying for it.
I don't trust Google any more than Microsoft -- having "don't be evil" as a corporate philosophy seems to be aiming kind of low. People used to aim for perfection, then they used to strive to be virtuous; now we're reduced to half-hearted attempts at not being evil? Way to raise the bar, Google. LOL
Right now Microsoft's charging for Hotmail via Outlook does seem like it fits into a pattern of nickle-and-diming to death, which is a shame. They're trying to fit everything into a subscription model (perhaps you recall the ruckus caused by "Software Assurance.") From here, it looks like the suits in legal and the bean counters are running the show, instead of the engineers.
I used to be such a Microsoft fanboy. Sigh.
When I went to sign up for "Hotmail Plus," I noticed MSN already had my credit card info and mailing address handy, presumably for my MSN Watch (the first watch with an annual subscription). Yeah, the watch that reboots itself several times a day.
Sadly, I think we can expect more of your "i gotta play checkers now for 90 bucks a year."