Just signed up at http://domains.live.com

Have us host e-mail and IM for you in a domain you already own.

Create up to 20 e-mail accounts within your domain
Get a 250 MB inbox for each account*
Check your e-mail from any Web-enabled PC
Junk e-mail filter protection using Microsoft SmartScreen technology
Virus scanning and cleaning of e-mail
Seamless access with MSN Messenger, MSN Spaces, etc.

Sign up process was pretty easy with the following steps :-

1. Choose a domain name own by you
2. Change the MX record of the domain to point to hotmail server. You need to
   host your own DNS
3. Verify MX Record
4. Once that is done, you can begin to add users to the domain
5. Users can log into hotmail.com to start using email
6. Only 2MB of email space is given upon sign up. 250MB may or may not come
   later 🙂
7. The process took about 15 minutes to complete.

Hence it will be AD supported via hotmail.com. 2MB space is definitely grossly insufficient that render the box created useless unless 250MB space is given.