According to RFC 1035, "For all parts of the DNS that are part of the official protocol, all comparisons between character strings (e.g., labels, domain names, etc.) are done in a case-insensitive manner."; thus, preserving case in the browser does not present a security issue because "hotmail.com" and "hotmaiL.com" will end up resolving to exactly the same IP. And indeed:
PuddleJumper:~ bob$ host hotmail.com
hotmail.com has address 64.4.32.7
hotmail.com has address 64.4.33.7
PuddleJumper:~ bob$ host hotmaiL.com
hotmaiL.com has address 64.4.32.7
hotmaiL.com has address 64.4.33.7
The RFC goes on to state that, "When data enters the domain system, its original case should be preserved whenever possible." This suggest that, in fact, browsers
should preserve case names in their location display.
<
http://www.faqs.org/rfcs/rfc1035.html> - §2.3.3
In the end, this is a completely cosmetic issue. However, I do see the utility in it, since intercaps make many domain names easier to read.