If you have access to your account via webmail, check whether the message sent from Outlook has been received there.

I think there is a small error in my question. By MS Outlook, I mean hotmail/live account which is web based - I dont mean MS Outlook which is a part of MS Office. So, when I send mails from hotmail, it doesnt get reported in Thunderbird. Please help.

I assume you have a pre existing account using the POP protocol, which only downloads the contents of the inbox.

Hotmail/Live/MSN/Outlook dot com now support IMAP which is a synchronized mail service, changes in one reflect in the other.

File menu (alt+F) > New > existing mail account and add your account to Thunderbird again. Make sure you have the "IMAP account type selected and your will get everything synchronized.

If it is like my account, your IMAP mail account will come with a sub folder under the deleted folder called pop that contains all the mail I have downloaded over the past years.

If you right click your \new IMAP account in the folder pane on the right immediately after you create it, and select subscribe you can unsubscribe from that folder so you do not see it

Thanks Matt, for the solution. It worked. But now, I have two email accounts for the same hotmail/live account in Thunderbird. I guess I must delete the previous account.

Tools menu (ALt + T) > account settings and delete the account using the account actions button at the bottom of the account list