Hi CB,
Source email address spoofing is very common in the spamming world, and not much you can do about it.
Ref:
how do u close a hotmail acc down
and
Not fussed about losing the acc
Am I missing something obvious ? How about just abandoning it and leaving it for dead ? I believe Hotmail do a regular spring cleaning, and any accounts that have not been logged into for X days get deleted.
Update: Alternatively, if you had googled "close hotmail account", you would have found this three step process on the Microsoft site:
Account Closure - Hotmail Account