RESOLVED - Federation with Microsoft is down (aka: "It's not you, it's me.")
We're actively debugging this, and I'll update this post once we have this resolved.
UPDATE (6pm, Eastern): We have identified the issue, and will be making changes this evening to rectify the issue. Things should be resolved by tomorrow morning.
UPDATE 2 (9pm, Eastern): Huge thanks to the RTC Ops, RTC SE, and Core Dev Teams for diving in and helping nail this. In the interest of transparency, this issue is also preventing Microsoft from communicating to our PIC providers (Yahoo, AOL, MSN).
UPDATE 3 (8am, Eastern, 4/08/09): Federation & PIC is now back up and running at Microsoft.