Among all the posts for help in the newsgroups, Jimmymac posted (6th post down) explaining he fixed it by deleting messenger's registry settings. Jonathan Kay created a .reg file that will automatically delete the settings for you, remove_msgrsettings.reg.
Before running the .reg file, completely exit Windows Live Messenger by right clicking the buddy icon near the clock and clicking Exit. Once you have run the file and clicked Yes, try signing in again.
You will loose quite a few of your Messenger settings, but then again it is necessary if you cannot sign in. The file may also help if you want a clean up of Messenger.
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Again, thank you very much!
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