Yes it's definitely a down grade. Especially if you use Outlook Express, Entourage or an older version of Outlook.
Outlook Express users can install
Window Live Mail a replacement for the Outlook Express e-mail client. Microsoft Office Outlook 2007 or Outlook 2003 users can install the
Microsoft Office Outlook Connector and maintain the functionality of WebDAV, using DeltaSync Microsoft's propriety replacement for WebDAV.
All other users are SOL. They will have to switch to POP. Unfortunately Window Live Hotmail does not support IMAP. Why should they, they have DeltaSync for there current products
This does not effect users that only access Hotmail via the web.