1) Why's this in the VPS forum? I highly doubt it's related specifically to the VPS.
2) It's probably just the fact that Hotmail hates PHP-Sent emails. Assuming that the email is just going in to the spam box and that it's not actually completely not delivering, try to configure vBulletin (I've never looked in to this before so I apologize that I don't know the specifics) to use SMPT rather than PHP. If it's not even going in to the spam box, then chances are that the IP or Domain are blacklisted @ Hotmail for whatever reason.
Best of luck figuring it all out.