@Michael: Unfortunately this is one we can't reproduce from test clients here in a variety of scenarios, and so this isn't likely to get resolved though it is possible. Essentially what we're seeing is what looks like an intermittent DNS or connectivity failure resulting in the alias expansion failing, that or, a local conflict or address book issue in Outlook is preventing the alias expanding as expected. We've tested with similar DNS setups, versions, operating system versions, and account configurations, all without luck in getting it to happen outside of their environment. The only other thing I can think of here is a GPO/machine policy difference we're not aware of. I'd suggested posting here in case others have experience similar issues or might know how to track this down a little better.
Kyle Kerst
IT Coordinator
SmarterTools Inc.
www.smartertools.com