So here is the fix,
Step One - Run Office Diagnostics
Begin by running 'Office Diagnostics' from within Outlook 2007 as shown in the screen cap below:
In the screen that pops up, click 'continue' and Office Diagnostics will begin running checks to see if there are any problems with your email program as shown below:
If diagnostics finds any problems, follow the instructions provided to get a solution. However, in most cases, diagnostics may not find a problem and when you run Outlook you encounter the same problem. If this is the case, move on to step two.
Step Two - Run SCANPST.exe
SCANPST is an executable file (ending with the extension .exe i.e. the file name is scanpst.exe) and a utility repair tool that comes pre-installed by Microsoft to fix these PST file issues. You need to manually locate the file in your computer's program files and double click on it. The program files are normally found in this directory C:\Program Files\Microsoft Office. In Windows XP, go to "My Computer" then, 'Local Disk' and then open the 'Program Files' folder. Look for the SCANPST file under the 'Office 12' folder as shown below:
Before you run this repair tool, you need to locate your PST file. The easiest and fastest way to locate your personal folders (PST files are complex databases that store your contact information, emails etc) is to use Outlook 2007 to locate the files. In the file menu, go to 'Data File Management'. Click on 'Personal Folders' as shown below then 'Open Folder'.
Windows explorer opens the folder showing the location of the Outlook PST file as seen below:
Next, go back to your SCANPST tool and double click on it. You will get a pop up requesting the name of the file you want to scan. Enter the file name by specifying the full path to the file, for this example, C:\Documents and Settings\Administrator\Local Settings\Application Data\Microsoft\Outlook\Outlook.pst. See below:
Close Outlook before you click on 'Start'. The tool will then begin checking your personal folder for problems.
If a problem is found, it will request to perform a backup of the file before effecting repairs. Click on 'repair' and the tool commences to effect the repairs to your personal folder file. Once the scan is complete, you will get a pop up similar to the one below:
Click on 'OK' and restart Outlook 2007 and check if the problem repeats itself. To be completely sure, repeat the same process with the archive.pst file which is located in the same folder as the outlook.pst file.
This fix should solve most problems that report cause Outlook to shut down and report that 'Microsoft Office Outlook has encountered a problem and needs to close'.
Leave a comment if this fix worked for you or if you know of a better fix non-techie fix let me know about it.
If this fix does not work for you, try this free Advanced Outlook Repair Tool.