I do not know whether Microsoft will continue developing MSN Messenger, but so far, I don't think that Live Messenger caused MSN Messenger to become obsolete. Nevertheless, by checking Microsoft's policy regarding releases of other programs (i.e. Windows 98, older versions of IE, etc.), I think it's obvious that even if developing and support for MSN Messenger hadn't stopped by now, they will end sooner or later.
Regarding the difference between the two versions: for me, there are two differences that make me like the Live Messenger better: The software's appearance (the less important one) and the ability to send off-line messages, which allows me not only to send messages to users in my list who are disconnected at the moment, but also to send messages while I'm appearing as disconnected (like "hidden" mode in ICQ).
Another difference, which some people might consider as important, is the ability to create folders on your computer which will be shared with other users on your list (you can create different folders for different users).
I also believe that the VOIP functionality in Live Messenger is better, and tries to compete with Skype. Since I don't use VOIP myself, I can't say if that is indeed so.
