Richard Sim over on the Hotmail/Windows Live Mail team's blog has posted an entry entitled We Heard You Loud and Clear which states

To do this, we started from scratch and built a whole new service from the ground up – and we called this Windows Live Mail. As we brought users onboard to this new service and had them kick the tires, we learned quickly that users loved it. We knew we were onto a good thing. We also found that many users were extremely loyal to the Hotmail brand and perceived the beta as an upgrade to Hotmail. In fact, our most loyal users have been very happy with Hotmail for years and while they loved the improvements in the beta, some were a bit confused by name change. 
 
As we prepare to launch the final version of our new web mail service, we recognize the importance of ensuring that our 260+ million existing customers come over to the new service smoothly and without confusion. By adopting the name “Windows Live Hotmail”, we believe we’re bringing together the best of both worlds – new and old. We’re able to offer the great new technology that Windows Live has to offer while also bringing the emotional connection many existing and loyal users have with Hotmail.

I'm glad to see that a lot of the unwise decisions around branding that originally infested Windows Live are beginning to fade. First Windows Live Local switched to Windows Live Maps. Now Windows Live Mail is Windows Live Hotmail, which builds on a brand that is about a decade old instead of throwing it away.

What we need now is a campaign to rename Windows Live Mail desktop to something less unwieldy which also respects our brand with lots of mindshare. Perhaps Windows Live Outlook Express? :)