Do not try this at home, kids.
It just does not work anymore. Seems that gtalk does not 'show' your MSN contacts anymore, even if you do the PSI mambo jambo. If you, however, made this a couple of months ago, and your jabber server+transport is still up, you'd be able to use it. But there's no way to run a new configuration again.

I hope Gtalk engineers fix that. the Jabber community seems to be aware of this.
sigh