According to the site in the link below, Privacy Keeper is NOT Vista compatible. http://www.unhsolutions.net/IE-Privacy-Keeper/index.html
It is customizable and you can simply uncheck the cookie removal feature. That will allow ALL cookies.
You may also be able to select the cookies not to delete just as in Ccleaner which works pretty much the same.
In IE7 you can block the advertising (third party cookies) from installing. See simple instructions in link below.http://www.howtogeek.com/howto/windows-vis...cookies-in-ie7/
Since it appears Privacy Keeper is not yet Vista compatible, I would stop it from running at startup until it is or remove it.
I think blocking the third party cookies and stop using Privacy Keeper will likely solve your problem with Hotmail.