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you were definetly on to something, since your original post, in which i replied that i could see the LS partner listings, i have been watching the MSN serps, and they have been switching to include and exclude the LS listings, very bizarre.
Whether a glitch with the system or something up MSN's sleeve, not sure.
Have noticed that during normal times what is returned depends on the competiveness of the keywords. Highly competitive keywords return results from all of the categories: featured sites, sponsored sites, web directory sites, web pages. Less competitve terms go straight to web directory sites or even web page results (where we pick up most of our MSN traffic).