Configuring outlook 2003/07 on client computer first time after joining SBS

System details:
Server: SBS 2003 with SP2
Client computers running WinXP SP2

Its a 2 NIC setup – IP settings are fine. Client computers were successful setup and users defined using the IE wizard interface (http://servername/connectcomputer).

Okay, now to the problem:

Receive error message when attempting to run Outlook2003/07 on client computer.

“Cannot open your default email folders. You must connect to MS exchange with current profile before you can synchronise your folders with your offline folder file.”

Outlook then fails to run first time and closes.

Tried control panel | mail | creating new user profile and making it default… that doesn’t work.

Uninstalled office 2007 then re-installed with SP1 patch.

Tried again – no luck – same error message.

Can someone please help!

Mark