I got a good laugh off of this, but is it really possible to get better quality from a lower bitrate?
Sure, if you also switch to a better codec, such as using H.264 instead of MPEG-2. However, I don't think that's what's happening in this case.
The Microsoft announcement says "Use of the software is governed by the Windows Live ID Sign-in Assistance 6.5 Beta License Agreement accessible as a file in this download." So you can't read the terms of service without downloading (and installling?) the software.
If you scroll down further, you'll see "Windows Live ID Sign-in Assistant 6.5 beta License Terms.rtf" which can be downloaded and viewed separately without having to install the program.
Life would be so much easier if we could just look at the source code. -- Dave Olson