I just fixed the same exact problem. Trick is to use Windows Explorer, Tools>Folder Options>View and Select Show Hidden Files and Folders and de-select Hide extensions for known file type. Select OK. While still in Windows Explorer, drill to c:\Documents and Settings>'user name'>Application Data>Microsoft>Outlook. Now either delete or rename outcmd.dat. Close Windows Explorer and restart Outlook. It should now be in 'normal' mode. The outcmd.dat becomes corrupt.
(Amazing huh? Microsoft, corrupt files...hmmmm). Power outages could cause this if the application is open, without a proper shutdown.