Microsoft's obligation to the user are what the user agreed to when they clicked the 'agree' button. A free service is still a service; both parties have obligations and they're declared in the T&Cs.
Microsoft benefits by offering this service, if they didn't, it wouldn't exist but it is generally understood that the service will be fairly limited in terms of support. On the other hand, this kind of service failure isn't expected from a major brand and people are perfectly entiteled to complain when it fails this badly and MS doesn't do what seems necessary to fix it.
MS leads people to expect things about their service and when it doesn't live up to those expectations, people will shout and MS will suffer brand damage. That's the way it works - people have high expectation of a service regardless of price once they start to rely on it - companies that don't get that are in for trouble.
Life, don't talk to me about life - Marvin the Paranoid Android