Just checked my MSN Alerts list. All except the second box is ticked on mine.
If my contact's box is open on my desktop, I don't get a sound alert if they send me a message, I only "hear" them if the conversation box is minimised. Also, if a contact is blocked, I don't get any kind of alert when they come online. This probably isn't what's happening with your MSN, but just another thought.
Never put off till tomorrow what you can avoid all together