Thanks Aaron! I'll try your suggestions. I wasn't able to repro either and no other PCs in the office are affected --it's isolated to his PC.
I tried turning off McAfee anti-virus firewall would have been enough, but I'll turn it all completely off.
I opened a MS case 112092762850493 to help troubleshoot for a faster resolution in case these don't work.
------------crmaddin-20120923.log--------------
# CRM Tracing Version 1.1 Unmanaged
# LocalTime: 2012-09-25 12:40:44.314
# Categories: *:Verbose
# Schedule: No registry key - using default value: Daily
# ComputerName: PC
# CRMVersion: 5.0.9690.2730
[2012-09-25 12:40:44.314] Process:OUTLOOK |Thread:6856 |Category: Unmanaged.Platform |User: PlatformUser |Level: Error | HrReopenMAPIMessage File: c:\bt\40250\src\application\outlook\addin\common.cpp Line: 1353
>hr = 0x80070057
[2012-09-25 12:40:44.330] Process:OUTLOOK |Thread:6856 |Category: Unmanaged.Platform |User: PlatformUser |Level: Error | CInspectorWrapper::UpdateOpenInspectorsCollection File: c:\bt\40250\src\application\outlook\addin\inspectorwrapper.cpp Line: 943
>hr = 0x80070057
--------------------------------------------------------------
The below trace showed no errors, but mostly showed about 20 repeats of this. Looks like it's attempting to execute the lookup but fails.
=======PC-OUTLOOK-Client-20120925-1.log=======
>Begin: Get IDocHostUIHandler.BrowserShell: https://<ORG URL>/_controls/lookup/lookupinfo.aspx?LookupStyle=single&browse=0&enableRemoveBtn=0&DefaultType=1&objecttypes=1,2,4,4402,4406,4700,10000,10001,10002,10004,10005,10006,10007,10009,10010,10011,10012,10014,10015,10017,10018,10019,10020,10022,10023,10024,10025,10028,10029,10030,10033,10034,10035
[2012-09-25 12:40:51.196] Process:OUTLOOK |Organization:3******d-*****-*****-*****-b**********6 |Thread: 1 |Category: Application.Outlook |User: 00000000-0000-0000-0000-000000000000 |Level: Verbose |ReqId: | CrmOutlookWebBrowser.get_WebBrowserExternalObject ilOffset = 0x0
at CrmOutlookWebBrowser.get_WebBrowserExternalObject() ilOffset = 0x0
at OleInterfacesWrapper.Microsoft.Crm.Outlook.UnsafeNativeMethods.IDocHostUIHandler.GetExternal(Object& ppDispatch) ilOffset = 0x0
at UnsafeNativeMethods.DispatchMessageW(MSG& msg) ilOffset = 0xFFFFFFFF
at ThreadContext.LocalModalMessageLoop(Form form) ilOffset = 0x89
at ThreadContext.RunMessageLoopInner(Int32 reason, ApplicationContext context) ilOffset = 0x20C
at ThreadContext.RunMessageLoop(Int32 reason, ApplicationContext context) ilOffset = 0x13
at Application.RunDialog(Form form) ilOffset = 0x11
at Form.ShowDialog(IWin32Window owner) ilOffset = 0x261
at Form.ShowDialog() ilOffset = 0x0
at OutlookInstance.Microsoft.Crm.Application.SMWrappers.IOutlookInstance.ShowWebDialog(IClientOrganizationContext clientOrgContext, Boolean modal, String url, String features) ilOffset = 0x50