This doesn't actually sound like a "hack" or a "break-in" at all - at least according to Microsoft. It sounds like a lot of people are just getting phished or hit with malware. Not that that's a good thing, but it isn't strictly a Microsoft break-in, nor have Hotmail, xbox live, or Microsoft live been "hacked."

In addition to phishing and malware, I'd also check to see if this user had a PSN or Gawker account with the same email and password.