Shoutbox

Yes right MP!L is not an IM-Client but I thought it may operate on the layer between Windows Live Messenger and the port it communicates through.
If that's not the case, yes it might be very troublesome to implement encryption.
But if it's operating on this layer it should be possible to allow encryption without knowing if the the other person supports this encryption or not. Because on the very begin of conversation OTR must share the temporary keys between the conversation partner (in a safe way that there is no man in the middle) that he will be able to decrypt your message. If this fails (because you get no answer from the other client on this request) you know that he can't decrypt your message.
Well I didn't read now the documentation of the OTR but overall that's the idea how such is working.
Actually there is already software available called otrproxy which allows to encrypt Microsoft Live Messenger messages but it seems like they stopped developing on it.

About law, well I am not a lawyer so I have no guess what is now allowed or not.
What I can say is that they can't forbid you to use a encrypted communication channels but yes they have the right to ask you for the key and the password to activate this key that they can decrypt your messages.
So that's why OTR uses only temporary keys. If the communication channel gets closed the key will be removed. So there is no key existing any long which they could ask for. And as there is no digital signature on the encrypted message they also can't say that you've send this message. That's the idea of deniability and perfect forward secrecy OTR is using.

Well of course law can forbid that you remove this key but you can be sure that they can't decrypt your messages on the fly and need to get first access on your PC to get this key. I have nothing to hide when I am talking via MSN Messenger because I would never send sensible data through it but it gives me a feeling of security and privacy if I know only me and my discussion partner can read what we are talking. They don't need to know every detail of your life.

Of course I could stop using Windows Live Messenger but many of my contacts are using it and they won't change to another IM because they have also many contacts using this messenger too. And I like the GUI and the feeling of talking via the Live Messenger.

So that's why I am asking the team of MP!L that they think about an implementation of message encryption into their software to support personal privacy.