iTunes: Syncing iPhone, iPad, or iPod touch with MS Outlook requires Unicode .PST file
After selecting calendars or contacts to sync with Microsoft Outlook in iTunes and starting a sync, you may receive an error message that "OutlookSyncClient.exe has encountered an error and must close." The sync may not complete and contacts and calendars may not completely sync between the computer and iPhone or iPod touch.
This may be due to the format of the Outlook Personal Storage File (.PST) used to store messages, contacts and calendar information by Microsoft Outlook. Verify that Microsoft Outlook 2003 is using a Unicode formatted storage file. If it's not, it will need to be converted.
For steps to verify the file format, see this document from the Microsoft Office Online help for Outlook 2003.
If the PST file format is not Unicode (or if it is and you are still experiencing problems syncing data), the Outlook Personal Storage File (.PST) will need to be converted to Unicode format.
Microsoft documents the procedure for converting an Outlook Personal Storage File (.PST) to Unicode in Office Online in this document.
Contact Microsoft if you need assistance in converting the .PST file format.