Not sure how to help as your posts are contradictory.
You can only set up an email account by using safari and then add to your ipad by using Settings/Mail/New Account. The password for your email (the new account you are adding is the same as you use when you log in on safari). You do not enter your Apple ID password.
Is the email address you are trying to add correct (ie @ hotmail.co.uk or @hotmail.com)
When you add another email address on your ipad it asks for verification to make sure all the details are correct.