Thanks for the reply.
Yes, I have tried running it in XP mode with SP3 compatability. On a side note once I receive my mail and close Outlook, there are two windows that are displayed, however they disappear so quickly they are unreadable. I have also checked that the directory tree that contains the .pst file has open permissions on it.
The XP disk is the second disk on this machine so it rules out a possible hardware problem.