Someone has registered my partner's recycled email account

Why would someone do this and what can she do to protect herself?

It is not clear what the motive could be. Maybe someone is recycling old, forgotten, deprecated accounts to sit and wait for an important email to arrive that offer potential for financial benefits or to attain illegitimate access (e.g. Apple ID account access) or just use it for spam.

There is not much she can do to protect herself but to try to "un-link" accounts linked to that email address or, if that is not possible, delete these accounts since you have no way of accessing that email now and someone else clearly does. This makes it a security risk. Other than that, notify the hosts such as Hotmail (which you already did).