Thanks to BB for the heads up ;)
Microsoft continues to redefine and focus the features of the free version of Hotmail... yep, you guessed it: another feature you now have to pay for. :(
MS has reduced the size limit for attachments to a paltry 512KB, leading to:
"This file is too large to be attached. Please remove attachments until the total size is less than 512KB or sign up for MSN Extra Storage to be able to send larger attachments."
So that basically means that if you want to send any meaningful file - say a spreadsheet or a presentation - then you have to "upgrade", ditch it altogether and search for another (free) mail provider.
I guess Microsoft must really need the money and must really need the $19.95 a year.