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to verify your site you will get some xml code which you put in a file named LiveSearchSiteAuth.xml and upload to the root directory of your site.
Is there something I need to do or something I should not be doing?
Yes, you should save your pages with the keywords you want to be found under, i.e. if you want to rank your articles for "guide to the best blue widgets", you should save it as "guide-to-the-best-blue-widgets.html"
I just checked this with two of my websites: Website 1 is very popular with gazillion backlins and ranks high for many things, while Website 2 is relatively new and don't have nearly as many links to it as the first one.
Using the blue widget example above, I have a page on Website 1 which I have saved without any keywords, simply article number - it ranks nowhere in the first 50. I have similarly themed page on Website 2 which is saved as "guide-to-the-best-blue-widgets.html" with zero links to it, but it ranks #3 for "guide to the best blue widgets".
MSN Search is generally pretty stupid, so you have to help it get the idea :)