I think that's a good point. It seems to me that it should probably be legal to act as a proxy for a user and do anything that user could otherwise do themselves regardless of any TOS.

I know that Google provides an API for accessing Google Contacts w/o passwords, but does Hotmail provide similar? If not, then it is fair... you use what you can. Otherwise, if there is a better way, then it should be used. I don't think that legal pressure is the best way of doing that, but it certainly is understandable to me.

Hotmail does have an API: http://msdn.microsoft.com/en-us/library/bb463989.aspx (looks complicated but is fairly easy)

If it's in Facebooks TOS that you need to access their site specifically through them then yes, Power.com is in the wrong.

Facebook doesn't get to define or create laws and ethics through their TOS.

Then they should ban the users who access through a proxy. A site can't put up a TOS that says you can't access through a proxy and then wait for it happen to sue. The web would be chocked full of liabilities if shit like that were allowed to happen. Searching Google would be too dangerous, what if one of the sites in a SERP had a TOS against coming from a referrer?