Originally Posted by dvseals

Only thing I found for organizing contacts is,
on your right (Both when you first open hotmail and while you're in your inbox)
there's a link that says "Messenger" and then "Options" next to it.
Click on "Options" and scroll down and select "more options"
down at the bottom of this page is a category named "Customize contacts"
under that is "display contacts as..." Click this link and it'll give you 4 options.
Select one of them and it will organize your contacts alphabetically.
:)
Hope this helps and does what you wanted it to :)