Thanks Tom - there is an enormous amount of stuff on there and I have not yet found any reference to the max size of the database - but will keep looking.
I have just had another go at the problem and think the best bet is to try an upgrade of Outlook to 2003 (plus all the other MS Office bits that go with it). Either that or use Outlook Express as on this particular machine there is no use made of all the Outlook bells and whistles. The only difference I can see in the mail handler that matters to us is that in Outlook you can set a rule to file sent & received messages; in OE you can only set the rule to file incoming messages. Oh well.
A really helpful poster on the other place has come up with this pretty definitive answer to this question:
AlbertLionheart - you have it right. amazing. that is a good memory. 2003 and 2007 can both be up to 20GB. I personally do not recommend anyone to have a file this large. It is "pack-rattish" to have to keep that much email stored up. It would take forever to find anything and if you use the Vista Indexing then it would run and run and run and probably get tired. I just have my Outlook Autoarchive. I cannot stand slow performance when it comes to an application that I always have open. It would drive me crazy.
anyways here is the info:
http://support.microsoft.com/kb/830336/en-us
SUMMARY
Microsoft Office Outlook 2007 and Microsoft Office Outlook 2003 have both a different format and a larger overall size limit for the personal folders (.pst) file than the .pst files that are in the earlier versions of Microsoft Outlook. In Outlook 2002 and earlier, the .pst files are in the American National Standards Institute (ANSI) format, and the overall size has a limit of 2 gigabytes (GB).
By default, .pst files are in the Unicode format in Outlook 2007 and in Outlook 2003. Additionally, the overall size of the .pst files has a limit that is more than the 2-GB limit that is imposed by the ANSI .pst files. By default, the limit for a Unicode .pst file in Outlook 2007 and in Outlook 2003 is configured to be 20 GB. For more information, click the following article number to view the article in the Microsoft Knowledge Base: