It seems that Microsoft is discontinuing support for Live Messenger Web Toolkit as noted at the top of the Live Messenger Web Toolkit documentation, it will be unavailable. They moved documentation to Live Connect Developer Center where I hoped to find new implementation details but so far there is no example code for web based xmpp clients. But even more recently they announced that they are killing the "Live" branding.
So the short story is that web live messenger is pretty much dead at the moment unless they come out with some new example code. I don't know when we will have any replacement solution for chat.
Windows Live authentication may also be going away or changing the implementation requirements as well as the branding. They have some documentation here but I think it is all in flux until they complete the branding changes and rebuild their services on Azure. They have example code that seems mainly for mobile devices and windows phone.
Really for the moment the easiest way to use Windows Live to sign in is via the Janrain Engage support we have built in to mojoPortal. By using Janrain we don't need to keep up with the changing implementation details as Janrain does that for us.
Best,
Joe