Problem 1: And it's not an Android problem or a sync problem, it's an Outlook problem! I'm using Outlook 2007, and when I create a contact or calendar entry I do it using the buttons below the folders. There are several (mail, calendar, contacts, tasks...). HOW do I get the contact and calendar buttons to point to the folders in the hotmail section instead of the Outlook section? I tried setting the data file to the .ost file, but it won't let me - it just says the data file for the hotmail account is "not available".
I'm not exactly sure what you mean by "point to the folders". Maybe this will help...
1) Personally I always leave Outlook in the "Folder List View" (Ctrl+6). I've been doing that since about 1998. I think it's the best view because it leaves EVERYTHING (mail, contacts, calendar, tasks, etc.) easily viewable and accessible. I don't understand why people choose to spend their time to switching back and forth between the limited "mail view", the limited "contacts view", the lmited "calendar view", etc. It's something you may want to consider, but I understand that old habits die hard, and you may have perfectly good reasons for flipping between the various views. But if you use the "folder list view", you could perhaps just collapse the "Outlook Data File" so that you don't have to see all of it's folders. Of course you would do this by clicking on the little triangle next to it.
2) Personally, when I create a new contact, email, calendar item, etc., I do so by hitting Ctrl+N. For example from within the Gmail Inbox, I hit Ctrl+N to create a new Gmail email, and from within the Hotmail Contacts folder, I hit Ctrl+N to create a new Hotmail contact. To me that's the easiest way to create a new item. I do that all from the "folder list view", and I've been doing it that way since 1998.
3) If for example, you really like "contacts view", to my knowledge you can't choose not to view all of your contacts folders, but you can move them up and down by dragging and dropping them with a left-click-hold of your mouse, so you could move the most-used folders to the top.
4) If you're talking about things like, responding to an email-based calendar invitation and wanting it to end up on the Hotmail calendar, or on the "From:" line of an email doing a "right-click, add to Outlook contacts" maneuver and wanting it to end up in the Hotmail contacts foler, then you need to set your Outlook data file as your default data file. If you go into the Windows Start -> Control Panel -> Mail Setup -> Data Files -> Select your Hotmail data file and click "Set as default". (I'm not exactly sure if that's right for your version of Windows and Office. I'm on Windows 7 & Outlook 2010.)