Log into your Hotmail account.  Click the down-arrow to the right of your name at the upper right of the Hotmail window.  Choose Account.  Now click that down arrow again and choose Account again.  You should be on an “Account overview” page.  There will be a “Close account” link toward the bottom.

You can also log into the MSN account and disassociate the Hotmail account from the MSN profile.

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