I am experiencing the same problem on one of my systems, but not on another using V7.03
Good system is configured:
Windows 2000 SP1
Outlook 2000 connecting to Exchange 5.5 SP4 server.
System with errors is:
Windows 2000 SP1
Outlooks 2000 connecting to an Exchange 2000 server.
Configuring PGP on another machine that connects to the Exchange 2000 server produces the same error leading me to believe that the problem may be related to Exchange, not the client. Nothing in TechNet about it though!