microsoft closing small business

Same boat, I had hosted with them for about 3 years as well.

I ended up with a cheap unlimited hosting deal, (£2) off ebay, and spent $30 employing a vworker to rebuild and manage the transition to a new host and new site.

Very happy so far, especially with the work done by my Vworker.

Beware that you need to be on the ball with the change over, you have to close your account to get control of your domain name. Your site will go off air within seconds!
You then have to arrange for the redirect to your new host - allow an hour or 2 to jump through those hoops than another 24-48hrs for the DNS reroute to point traffic at your new site.

Sounds like you have four things that you need to resolve:

1) You need to move your domain away from where it is at the moment and move it to a different host. There are two different components to a website, there is the "name"/ registration, IE: "www.yourbusiness.co.uk" - this is renewed yearly or every couple of years and gives you the ability to use that name for a website. The second component is the website itself, for which you will need a host. This basically means the files for your website sit somewhere on the internet and when people go to your name (known as a domain name) it sends the webpage to them. For a simple site for a Small business you could get away with using something like http://www.webhosting.uk.com/ for a couple of quid a month.

2) Second component is e-mail. You are a perfect candidate for something called Google Apps for domains. This is free for companies with under 10 users. You can sign up here https://www.google.com/a/cpanel/standard/new3 . This has numerous advantages, you don't have to worry about spam and you can expand in the future for free if you need more than one e-mail address. It utilises the gmail interface which is probably the best in the world (in my opinion).

If you are comfortable in moving your website on your own then you could follow the below steps, some are of a slight difficulty

1) Sign up for a Google Apps account (link above)
2) Sign up for your new hosting provider (make sure they do domain registration and hosting)
3) Export all the mail you need to save using instructions on exporting mail for your e-mail program; can't give you better instructions than this as live messenger is not an e-mail program
4) http://ask.!!!!!!!!!!.com/smallbusiness/wiki/articles/self-transition-guide-for-office-live-small-business-customers.aspx Follow steps 3,4 for migrating your website
5) Once you are happy all your data is saved follow the reply here http://ask.!!!!!!!!!!.com/smallbusiness/qna/t/38756.aspx to move your domain to your new registrar
6) When you have done that you need to somehow get your site to the new host. Normally you can transfer the files directly to it through FTP but I don't think with Office Live Small Business you get that level of access. It may require a different method, I don't know what your site is or how it is constructed so I can't tell you
7) Once your site is moved, ensure the nameservers on the domain are correct and the mx records (mail records) are pointing at googles servers

That is basically it. To be honest based on your post above I think you may need to get someone to do all this for you. I don't want to seem like I am pushing commercial services here but I can do it for you, please feel free to PM me if you want to discuss. Good luck!

PS: Office 365 is probably going to be a waste of money for you so I wouldn't be tempted to go with them!