I did it differently.
I noticed that I can directly submit a request to cancel the account under "Account Management". It is really easy and straight forward. Below the screen capture after the final step.
After I received the email from M$ (very quick), I need to add the domain to Melbourne IT.
Go Direct - enter the domain name and key. (Ignore the new key balabala on the webpage. I never got that email.)
I need to create a new account, and enter the domain name and key again inside the account.
Unlocked the domain and get the domain authinfo (tiny orange letters show on the top right part)
Go to 1&1. I chose it because of the Free Private Domain Registration and $6.99 for the first year deal.
Search my domain and initiate the transfer.
Enter the code from the Melbourne IT page and pay the money ...
Now, I am waiting ... I will post a comment when I have the transfer finished. :-)