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What I was hoping to hear is that you tried to configure a profile for this user on another machine and it worked. This is just a wild guess, but I think that Microsoft Outlook might need to be uninstalled and re-installed on this machine.
I know this answer sounds like a copout but assuming all network connectivity and name resolution is functional on this workstation, Microsoft Outlook should work. I have seen many authentication problems simply because the DNS server or WINS server addresses were entered wrong. If an IPCONFIG /ALL on this machine match the IPCONFIG /ALL settings of a working machine on the same segment of the network, then I would try to repair or reinstall Microsoft Outlook.
MEMBER FEEDBACK TO THIS ASK THE EXPERT Q&A:
Couldn't this be an issue with the Hosts file?
—David M.
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Good point. Yes, if the Hosts file or even the LMHosts file is configured with invalid information that could cause this problem as well. The troubleshooting process for name resolution for Microsoft Outlook is described in "Troubleshooting slow startup of Outlook and Exchange clients."
—Richard Luckett, Spam and Security Expert
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