Problem setting up Exchange server on Outlook 2011
Outlook 2011 requires an Exchange 2007 and above server. This is because Outlook 2011 works over the Exchange Web Services protocol (EWS). This wasn't Apple's decision, but Microsoft, as it is the latest form of the Exchange service as they are phasing out MAPI, the legacy Exchange protocol. Apple's Exchange implementation in 10.6 and 10.7 also uses EWS. 

iOS devices however connect to Exchange via ActiveSync, which is supported all the way back to Exchange 2003. ActiveSync is designed for mobile devices and does not work on a desktop system.