Just to confirm, you've set ACT up to send email using Microsoft Outlook? Note: Office 2007 and ACT 2007 are, I believe, incompatable. Also, be sure that Microsoft Word is not set as your email editor in Outlook. (Outlook 2003, go to Tools | Options | Mail Format(tab) and ensure that both 'Use Microsoft Office Word' boxes are unchecked. If that is not the issue, read on...
In ACT, under Tools | Preferences | Email(tab) it should display Microsoft Outlook in the first dropdown window. After you've confirmed that, click the Email System Setup button.
Microsoft Outlook should be checked under the 'Select One or More Email Systems' radio button list. Click Next.
When viewing, composing, and sending emails, use: (Choices are ACT or Outlook email programs). It sounds to me like you want Outlook.
Further - you need to be sure that the ACT Address book is set up in your Outlook profile. Check out Control Panel | Mail(icon). Again, assuming Office 2003 - click on 'Email Accounts' then 'View or Change Existing Directories or Address Books.' ACT Address Book should be listed. If not, click Add / Additional Address Books / ACT Address book. Follow the wizard.
If all fails, perhaps consider reinstalling the software.
Hope this helps,
~Melagan
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"It's never too late to become what you might have been.