Same thing happened to one of my clients. Had several thousand, now a couple hundred. Maybe an MSN dance? Or maybe they tweaked their algo a bit.
don't ask why but understand it. take a look what kind of pages are lost from index. it is a permanent lost or only temporary. is there any similarity? once you understand it then you know what is MSN algo. and that knowledge is good for you.
Its always happens. But it will be temporarily. MSN will index all soon, bcz its happens to me many times
Are you using sitemap? Have you checked the html on your pages? If you have done recent changes on your website, you might want to validate the html.
MSN is unfortunately hard to figure out. They are more keyword based than the other engines, but because so very little traffic comes from MSN, there's not been much done to figure out how to do SEO for that engine. Sorry.
MSN sends a lot of traffic to one of my sites (8-9k/day!), for a single keyword. It's 8 years old domain...