iCal and Mac Office 2011
Unfortunately, it is my experience that iCal and Outlook STILL do not play very nice together, although inviting from Outlook and accepting in Mail/iCal still seems to work much better than going the reverse direction.

There are some third party programs that tweak how ical sends invitations to make them more compatible

http://www.zamain.com/

But, yes this has been a known issue for years as any quick search for "ical outlook" will let you know! I thought this was supposed to be fixed once and for all with Office 2011, but I guess it has not been.