"Is not a copy held on line? I just click on the 'contacts' option in the drop down menu under the hotmail header. "
Not neccesarily. Its only online if Live Mail is configured to log into an online Windows Live account - so giving access to the Live/Hotmail cloud storage
If its just set up traditionally, then it should be present as a list of individual files in c
users\user name\contacts
Just copying those in sometimes works, however more likely they'll have to be dragged in via the "import" wizard