When you try to drag a message from your Hotmail Inbox to the Hotmail Bulk Mail folder, you may receive the following error message:
Can't Move The Items. The Server Cannot Process The Request. The Server Responded 'Method Not Allowed'.
This behavior occurs because Hotmail does not allow you to drag a message from your Hotmail Inbox to the Hotmail Bulk Mail folder because the Bulk Mail folder is reserved for use by Hotmail Inbox Protector feature. This feature automatically moves incoming messages from the Inbox to the Bulk Mail folder if the message is perceived to be unwanted or unsolicited advertising (junk mail).
There is not an available work around at this time other than do not move messages from your Hotmail Inbox to your Hotmail Bulk Mail folder.
Outlook is performing correctly and is following Hotmail's policies.