As all Exchange admins should know, Exchange (and/or ESM) and Outlook are not supported on the same system for a variety of reasons related to MAPI service providers. However, there is a KB article (here) that tells you how to edit the registry to tell ESM to use mapi32.dll in the \exhsrvr\bin folder instead of the system32 directory.
I was installing ESM on a new application terminal server this morning and could not get SP2 to install. The error was that Exchange 2003 was not installed and, therefore, you cannot apply a service pack to it. But I had just installed ESM right before the SP install. After some troubleshooting, I discovered that I had prematurely created the registry key as described in KB 329136.
The article clearly states to install ESM and the service pack(s) before creating the key. Apparently, this is why, since the setup routine sees that registry key and it breaks something in it. Deleting the key and rerunning the SP setup allowed it to proceed normally.
I assume you would also have to delete the key before upgrading to a future service pack, so if you use the key to allow public folder management, remember that its presence will inhibit service pack installations.