There have been two long standing issues with the process. The first is that you can't change Hotmail.com, MSN.com or Live.com (including all the localized country versions there of) to another address as those domains are "reserved" (note that Microsoft has provided the ability from time to time to switch to one of these reserved domains however). The second is that you typically needed to remain offline for a good few hours for the modifications to all your contacts' contact lists to your new address. Before about a month ago, I was recommending to people to just make the change before shutting down for their day, and everything would be ready when they woke up.

If this has happened to you, the easiest fix is to return to the Live ID site and switch your address back to the previous one. After signing back into Messenger using the old address, your contacts will all be online again as per normal. You can then try again hopefully when this problem finally gets fixed.