Looks to me as if you've answered your own question! Sounds as if Outlook is working fine - you just need to stop using OE which is just confusing things. As Threadbare suggested, import your OE mailboxes into Outlook, and then dump OE and you should be fine. Best make some backups beforehand, of course, just in case
Mind you, I'd dump Outlook while you're at it and use Thunderbird as nffc suggested