Apple id will not allow change to use hotmail email for ID..can this be done?

Did you check here?

Change your Apple ID

If you no longer use the email address that's associated with your Apple ID, you can change it. You won’t lose access to your contacts, purchases, or other account information.

https://support.apple.com/en-us/HT202667

Have you logged into your Apple ID to see if the address shows under Reachable At, as a Rescue email address, or as a Notification email address?

Apple ID - Manage  

Apple hasn’t published any guidance for using an address again. Normally, if your e-mail address was associated with an ID in any way, for example as a Notification email address or a Rescue e-mail address, then it can't be reused with another Apple ID for approximately one year. I have also seen posts that stated Apple told them there was a 30 day waiting period before the address could be used again.  You will need to get another e-mail address to use as your Apple ID or you can try waiting 30 days to see if that works.