I created an account yesterday with a Hotmail address and cannot verify the account because of this issue. My password manager also didn’t save the credentials during account creation, so I don’t know what the password to that account is and have no way to reset it.
If you can’t fix things on the Hotmail end, maybe you should disallow account creation for email addresses that contain “hotmail.com” in a programmatic way. Help text advising people not to use Hotmail might also be good, but people don’t read help text.