By Default Outlook 2007 & 2010 profiles Encryption between Outlook and Exchange is enabled by default..
Outlook 2003 profiles don’t enable encryption by default.
Service Pack:
Make sure Outlook 2003 has Office 2003 Service Pack 3 applied. If you don’t it will not work.
Enable Encyption: Encryption must be enabled in the Outlook profile.
Under the Outlook Profile, choose “more settings” and then choose the Security tab. Make sure “Enable encryption between Outlook and the Exchange Server” is ticked.