Thing is, Hotmail alters urls in your emails so it can put that annoying "You viewing a page outside of Hotmail" bar at the top of the window. The new url goes through a Hotmail server, so surely it's possible for Hotmail to record every link you open? If Google is potentially invading privacy with their scheme, who's to say MS aren't potentially doing the same?
The cynic in me finds it interesting that a service of this type that so many people were looking forward to would suddenly have privacy concerns, especially when no-one seems to have the same concerns about other web mail services.

We all use them (Hotmail, Yahoo, etc, etc) but there's no way we know for certain that our emails aren't being read by someone else.
I suppose it really comes down to this: If you're that worried about your privacy, why are you using a free
opt-in web mail service in the first place?