An application on your computer (such as Picasa) can launch another program (such as Outlook Express) with relevant data already imported into it (e.g. your picture, as an attachment) but it can't normally launch a web-based service (which is what you seem to be trying to do with Hotmail).
You'll need to follow these instructions (including clicking on the link to learn how to set Outlook Express as your default email client, if required):
http://support.google...py?hl=en&answer=11049
Chris