Yes, there are still some folks using outlook2003. And, often this issue of outlook 2003 integration with Project Server 2007 is experienced. The reason maybe as result of the office 2007 compatibility components are not installed.
(click picture to enlarge)
To fix the issue, a change needs to be made to the registry.
Create a text file (.txt) and copy the code from below. Then, change the file extension to .reg and double click on the file to apply the change. Note: Take a full backup of your registry prior to making any changes to the registry.
Windows Registry Editor Version 5.00
Note: This posting is provided "AS IS" with no warranties, and confers no rights.