I'm not sure if this would help or not but Outlook disables links for security reasons. So when u open a message you will see an option above the To: section of ur message "Click here to enable links" kind of thing. if this does not help then Local Security Policies have overriden the outlook settings.
I Think you are in a Corporate Environment so the Administrator has disabled this as a whole group policy.

PLease check out with the person

Already tried that, thanks anyway.
I am the ADMINISTRATOR on this computer and our IT guy knows nothing about this.
any other suggestions ?
I reinstalled office but same thing happens.

1) On the Tools menu, click Options.
2) On the Preferences tab, under E-mail, click Junk E-mail.
3) Clear the Disable links and other functionality in phishing messages (recommended) check box.

See if this works. I hope you have done this already.

Hi I got a good link here.
I think you can get your problem solved
http://www.slipstick.com/problems/link_restrict.htm

http://support.microsoft.com/default...;EN-US;Q310049

Thanks, non of the above solutions worked.
I think I will backup my files and reinstall Vista this week.
thanks for the help.

Type gpedit.msc in run. Browse through the User rights and Local Policy section and see if you have had disabled an of such related topics. Topics in sense the security policies that deny or allow links of any kind be it internet explorer/ Outlook etc. see and find for such thing. I'm really unable to help you out because I'm not a Vista User. Please bear with my vague directions.
GOOD LUCK

Thanks for all your help Shouvik.d.
I reinstalled Vista and made a back up of my registry yesterday.
All is ok now, again thank you for all your help.

Oops you had to reinstall everything. Hope all is working fine now!

Happy computing

If you received this error after uninstalling any application that takes over the HTML open command (including, but not limited to, Chrome & Firefox browsers) you may also need to change the HTM/HTML association in the registry.

1. Start, click Run, type Regedit in the Open box, and then click OK.
2. Browse to HKEY_CURRENT_USER\Software\Classes\.html
3. Right click the value for the .html key and select Modify...
4. Change the value from "ChromeHTML" to "htmlfile" (or from FireFoxHTML to htmlfile)

Repeat these steps for htm and .shtml keys if they exist. You may also want to check the xhtml and xhtm keys.