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I was going to add this post to an existing thread but felt it might draw more attention this way . Another thread mentions they admit having a problem with 301s and it seems this is another problem altogether,
that LS is subject to exploitation by link farms and they are having a field day with them.
While each has their own specific way of providing results, it does seem that MSN is quite different. Like you, few of the major players appear on page 1 or 2 for some key search phrases. Although, the 301 issue you mention, if it is true, could explain a few things for us.
The 301 issue is very true. It's even mentioned by Microsoft employees in the Live.com webmaster forum. As stated by thier moderator:
Unfortunatly, Live Search does not handle 301 redirects well at this time. I recommend using a 302 to redirect your old URL to the new URL. This could make the difference.
I'm not sure anyone ranking well in Y! or Google would risk using a 302 instead of a 301 just because Live.com engineers cannot figure out how to handle a 301.