I've seen this circle before.
There are a couple of circumstances that I've had cause this:
1) Using Microsoft / Windows Messenger on my Mac. I'd often have to reset Safari after using Windows Messenger in order to get the hotmail page to load properly in Safari again.
2) When I've logged-out of hotmail, and then wanted to go back in. I would have to reset Safari to get it to work.
3) When I upgraded from hotmail to the Windows Live hotmail version. I couldn't get the update to work because of some code in their system that required me to use Windows IE 6 or later. So, I was going in circles trying to get the update to the new hotmail version (which has more capacity, and other nice features). I finally just booted the PC with Windows and upgraded the hotmail account in Internet Explorer for Windows. After that, I could log-in fine with Safari on the Mac.
Generally, the first thing I would try is resetting Safari (under the Safari menu). Then, see if hotmail will open properly for you.