I have done some research and lots are stating that hotmail are dropping emails. (I read once this is illegal)
My server is in no blacklists and isn't used for spam purposes.
Any suggestions would be great.
One thing you can do is to get an account with an external SMTP service (such as Authsmtp) and configure your email server (such as Postfix) to relay your email through that service. Many people use Gmail for this but Gmail requires unique settings that can make this kind of a pain. This allows you to piggyback on the deliverability of the other service.
If you are sending out newsletters, you might consider going with a specialized service such as Constant Contact.
If you look around, there are more blog posts and information sites that are more detailed. One of them is on hacker news as I type this. Good luck.
It may be against the terms of service or perhaps violate a service contract but for it to be illegal there would probably need to be evidence of some other nefarious activity.
That being said, are you positive the problem is with hotmail itself and not its mail handlers?
For example, if you use the incorrect sort of line breaks [1] in an email that gets sent to a qmail server, the server will silently drop that email message. It will report an error textually but not return an actual error code. This could make it look like your email was getting dropped. This happens quite frequently with machine generated emails.
Who knows if MSN / Hotmail uses qmail, but my point is that there may be other matters afoot than Hotmail intentionally playing hardball with you.
[1] Qmail pukes when you send an email that contains carriage returns without line feeds.
After that, don't just start sending a large bulk of e-mail to hotmail, send a few (they'll run some tests, open port, check SPF, etc!!). After a bit then start shipping mail out to hotmail.
Even after all of this you can still be up the creak, we've gone to using AuthSMTP at work now (having Postfix directly proxy the requests on). It's fast and we can deliver to hotmail (a lot less stuffing around).
It's Microsoft we're dealing with here.