Microsoft Live Custom Domains are now shutting down. I have been using this service for e-mail hosting for all my Microsoft Azure Websites, but now it is gone and no viable repl
First of all you need to identify how much and what all services do you need?
If it is just an IMAP/POP3 Email Box, then best option is a Virtual Server or Virtual Machine with cpanel, once installed with daily backup runs good for years, you get unlimited email accounts and unlimited space !!! You can increase your VM dynamically up when you need it. Drawback is, it takes little maintenance once in a while. But most likely cpanel auto update is very stable and I have VPS running for 5 years and every year we are just increasing our disk space.
If you want calendar along with live docs editing etc, then you have to go with Google Apps which is cheaper then MS Exchange. But if you need strict Exchange kind of services, then you will have to go with hosted Exchange.
I will not recommend spending money for Rackspace or any such Cloud Email which is priced per user, which is total waste of money as they do not offer anything apart from linux server with cpanel. Those services are only for non IT people. Since you have already asked question on Stack Overflow, you can easily setup and manage cpanel based linux OS.