Hotmail's notorious for falling victim to this one and others like it.
The first thing she needs to do is to set up another account with a different provider and attempt to send a warning to all her contacts. She should not use the old one at all.
For any important accounts such as her bank or any online shopping accounts, she should contact the companies directly and get them to put a stop on them.
Sadly the only thing she can do about the others is to let them go and open new accounts with new details - and not store her contacts in her hotmail account!