Through looking through some other posts it seems that Windows 7 has an issue with NTLM Authentication. To get the server to connect to your exchange server, you need to define your NTLM LOCAL security policies. to do this:
Open Control Panel
Open Network and Internet
Click on the left side "System And Security"
Next click on Adiminstrative Tools.
Now click on the shortcut for "Local Security Policies".
Natigate to "Security Options".
Scroll down to "NETWORK SECURITY: RESTRICT NTLM:"
Under Add remote server exceptions, you need to add your server under the exceptions rule. Under Add Server exceptions, you need to add your server under exceptions. You may enable auditing if you wish but I have disabled it. Next Most importantly you need to enable incoming traffic. The next field down says restrict all incoming traffic, you need to DISABLE this. and for the last step under "OUTGOING NTLM traffic", you need to set this to allow.
Once this is done, go into mail and setup your outlook box as normal. You do not need to put DOMAIN\Username. Just put the username as normal, and I used to server.domain.com, which my provider had listed as the "proxy exchange sever".
Next you will be prompted for login information needing your username (
user@user.com) and password (password). Once this is done, it closes and you need to open outlook. LET EVERYTHING SETUP. Once that is done close outlook and wait for approx 2 minutes open back up and enjoy.