You can't forward out of Hotmail to Gmail...

"Forwarding
You can forward your mail to one other e-mail address that ends in hotmail.com, msn.com, live.com, or Windows Live Custom Domains."

When I tried gmail anyway, I got a similar error message..."You're only able to forward mail to a custom domain or an e-mail address that ends in hotmail.com, msn.com, or live.com. Please try again."

-Wildman

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So this took some thinking but I finally have hotmail on my iPhone. The only limitation is you need to have a computer running that is working as the middle man, Here are the steps:

1 - Setup a free email account like gmail (use a new one)
2 - On a mac, install FreePops http://freepops.sourceforge.net/en/
3 - To make your life easy, also install the front end application MacFreePOPS http://www.e-link.it/macfreepops/
4 - Use the tutorial to get this working pull your hotmail and load it into the apple Mail program http://anchemac.info/anchemac/node/59 (oddly this is in Italian so just use the pictures)
5 - Set up a rule in Mail to Redirect all messages in this new account to another email address (use the gmail account you set up in step 1)
6 - Set up the new gmail account in Mail
7 - Sync your iPhone
8 - Sit back and enjoy

The basic overview is that FreePops is a local application on your Mac that works as a server and gets mail from your hotmail account and loads it into your MAIL application. Using the MAIL application, you can then redirect new messages to the new gmail account you set up. Finally, after you set up the gmail and sync your iPhone, the new account will automatically get added to your iPhone mail app. Now you are good to go.

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