Normally I’d enable NT Password Authentication so that Outlook can authenticate using the Network logon credentials, but with this software, it doesn’t exist in the Logon Network Security options.
So, I ended up installing “Active Directory Client Extension” pack from Microsoft’s website under http://support.microsoft.com/kb/239869 “Enabling NTLM v2 Authentication” …stopped after that install and didn’t do the registry fix. The option never appeared in the list, but Outlook stopped prompting for the password.