I've made a new e-mail with windows live ID
and
every time I log in, it prompts me to verify the e-mail but I already have and when I click the prompt it says I already have
but it won't let me change my display name (it's all greyed out and won't let me click it)
The e-mail isn't with hotmail, I have another email which isn't with hotmail and it works perfectly fine, lets me change the display name..

Help!

have you tried re-downloading WLM and trying again?  I seem to remember my WLM not working properly at first when I changed my email a few years back...