Similar to method 1, first log into your email account using URL. Windows Phone users should note that you'll need to reset your phone to factory settings and then set it back up with new account name.
After login, select Options - More mail settings option. Now click on "Rename your email address" option given under "Managing your account" section. Again similar to creating alias, enter your desired email name in "New Microsoft account" textbox and click on "Save" button. Also when you reset your phone, you'll lose all your personal data including your apps.
Upgrading from Hotmail account to account includes 2 things: If you only want to upgrade the interface of your email account when you login using a web browser, you can simply do that by visiting website and login using your Hotmail account credentials.
It'll automatically upgrade your Hotmail account interface to new interface.
Windows Live Messenger was bought by Skype and has since fallen out of favour.