Empathy cannot connect to MSN account
Removing telepathy-butterfly
(complete removal in synaptic) did the trick for me - no need for reinstallation.
It looks like Microsoft released a new version of Windows Live Messenger and made incompatible changes on the server side.
There is a Launchpad bug here: https://bugs.edge.launchpad.net/ubuntu/+source/papyon/+bug/663670. It looks like there is a proposed update ready for testing (cfr. https://bugs.edge.launchpad.net/ubuntu/+source/papyon/+bug/663670/comments/52).
Until the official patch goes through, for those who cannot wait, type the following in a terminal (tested on Lucid and Maverick):
gksudo gedit /usr/share/pyshared/papyon/service/description/SingleSignOn/RequestMultipleSecurityTokens.py
Then find:
gksudo gedit /usr/share/pyshared/papyon/service/description/SingleSignOn/RequestMultipleSecurityTokens.py
And change that to:
CONTACTS = ("contacts.msn.com", "MBI")
Now just save and restart Empathy and it should connect again.