Microsoft is in the final stages of upgrading that last pieces of the Tsunami (Live 3.0) version. The last portion is the MSN Integration and Alerts... which should be available later today.
In the process of these changes, their website is making a few changes. These changes are affecting Xbox Friends Thing functionality. I've stayed up late tonight (or, rather, this morning) to make the necessary changes to get back into sync with their website until a much better and technically superior solution is incorporated and made available (hopefully within the next 30-60 days).
So, if your one of my beta testers, please upgrade to 1.0.17 as soon as you can and see if everything is working as expected so I can get this release out to everyone as soon as possible.
I also encourage everyone to at least take a look at the MSN Integration features and let me know what you like, don't like, or would like to see improved. Many of those features will be included in future releases of Xbox Friends Thing... along with much, much more. Also, the MSN Integration (from what I understand) will require the latest version of MSN Messenger (6.2 as of this post - possibly an upgrade if I understand it correctly).
If you aren't a beta tester and would like to be, please let me know by using the contact link to the left of this page (please send me your gamertag so that I can flag your account accordingly) ;-)
[update] A direct link to add Alerts, just go here. Also, it appears that the Xbox.com website might be having trouble this morning... I'm seeing a lot of “An unknown error has occurred. Please try your request again at a later time.” messages when browsing to the site.