Microsoft has blacklisted Oxford University for unknown reasons, prevent students from accessing Hotmail and other services.  (Source: Oxford University)
Microsoft's motives for action is unknown, Oxford's semester is about to start

We received word from Oxford University in the UK today that Microsoft Corp. (MSFT) has blacklisted the campus for unknown reasons.  

Peter Bushnell, Oxford U. ICT officer writes:

If anyone is interested Oxford University has been blacklisted and cannot currently mail Hotmail/Live and some others. This has been going on for a week now.
We have only been given a small snippet from the Microsoft postmaster "we are unable to take action ... we are not at liberty to discuss the nature of the block". That's a nice brickwall Microsoft has.
From the OU Computing Services news page.
Ongoing problems with email to Hotmail, Live, MSN etc.
There is a problem, caused by an error in a non-OUCS department, that means the University cannot currently send email to several services, including Hotmail, MSN, Live and others. If you send email to any affected service it will either bounce back with an error or be held on the Oxford email systems until it can be delivered. Receiving email from these services remains unaffected but replies to such messages will not get through. Note that auto-forwarding your Oxford email to any of the affected services will not work at the moment so you may like to adjust your settings. OUCS is working hard to fix this problem but some factors out of our control mean we can't yet give an estimated fix time. We are sorry for the obvious inconvenience this will cause.
Help us Daily Tech. We are unable to contact a large number of people just as term is about to start next Monday.

We fact checked this -- Oxford U.'s ICT homepage is indeed complaining about a service outage, which is preventing people from reaching Hotmail.  

We have contacted a Microsoft spokesperson with whom we've worked in the past, seeking clarification as to why the university has been banned from Microsoft's services.

Update: Microsoft's spokesperson let us know that they are contacting their colleagues seeking more information on this.  We'll keep you updated when we find out more.

Update 2 (10/3/2011 11:00 a.m.):
While we're still waiting for complete info back from our Microsoft contact, the folks over at Neowin have posted a solid followup.

In that piece, they dug up the cause of the blockade.  They write:

Neowin's own Dave Legg reports that the Hotmail ban was due to an mailing list misconfiguration which resulted in replies being sent to all subscribers. This caused Microsoft to ban the University's outgoing email server.

And apparently Oxford, following DailyTech and Neowin's pieces managed to get the issues resolved.  A post on their site states:

Oxford Hotmail block lifted and nearing full resolutionThe Hotmail block on mail sent from Oxford University has been removed. Mails from Oxford to Hotmail, Live and MSN sent and queued from last week may take a day or so to deliver. Once that has happened you'll be able to send to Hotmail, Live and MSN again. For a fuller version of this please click the title of this item.

Microsoft is scheduled to hold a special Hotmail-related event today, so the timing of the blockage, was somewhat ironic.

Source: Oxford University

"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il

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