Thanks for the suggestion. I've talked with other people that claim just entering in the POP3 info in Thunderbird works. So I have to assume either my hotmail is not authorized for POP3 access or there's some other glitch preventing me from logging in. At this point I've already wasted 6 hours. I don't care anymore.
Turned out Thunderbird can download everything if you move it to your Inbox first. I got to the bottom of the mystery. My password was corrupted and I got in via browser only because I had a cookie. Only took 1/2 hour fighting Captcha' to get a new password.
They make it so much fun now.