I have had this same problem. I am running Outlook 2003 SP2. When I install IE7 I get the same behavior only with my Hotmail account.
The behavior is this:
Install IE7
Try to access HTTP mail (Hotmail account) through Outlook.
Even though password is stored by Outlook, a dialog pops up asking for the password. The Check Box to remember is unchecked.
Even if I retype the password and check the box again, Outlook refuses to log into my Hotmail account and keeps popping up the Password dialog.
All of my POP mail accounts are unaffected.
Remove "NOSPAM." to reply to this email address.
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