OK, I got it. I was translating new parts of the interface and it gave me the clue.

When setting up your site properties on Microsoft site you have to provide the url that points not to the site in general, but to the page of the site where the user login module is located, and it takes it from there.

If you have friendly URLs disabled (like I do ('couse FF turns russian words in the adress into unreadable crap)) you must get rid of "?" simbol in the addres. Substitute "default.aspx?tabid=N" with "/tabid/N/default.aspx".

Here is the blog article "Associating Windows Live Accounts wtih DNN"

I am not sure what you mean by item 1?  Did you disable the standard login method??

FOr the second one be sure that you setup the live id link to the proper place on your site.  Your login link without the ?returnUrl parameter

For the third one, this appears to be an issue with using SSL and the form.  I would need more details to see how it works.

For the last one, I believe the captcha would still work if enabled.