I had to use another computer to change my microsoft password (which also changed my email password - boo) and then I had to connect my computer to a landline internet connection (wifi wasn't available) and enter the new password and it finally worked. Just connecting it to the landline and using my original password might have worked but I was trying to get around the having to be connected to the internet - which isn't possible.
So long story short try connecting to a landline if your comp doesn't show you are connected to a wifi connection enter password - if that doesn't work change your password using a different computer and then try the new password while connected to a landline.
I don't remember how I went about changing my password - but it might be as easy as opening your hotmail account and creating a new one - google it :-)
Really irratating that you have to have internet connection to get anywhere on your comp (and really strange that this isn't an "all the time" scenario) I get on my comp more without internet connection than I do with connection - strange.
Sorry it took so long to reply.