Not being a Outlook user, I cannot attest to seeing them on the iphone.
But we have a few people here in the office that use Outlook on their PCs and it drives me absolutely bat$h1t crazy when it has problems.
So my aversion to this software is personal.
I couldn't imagine how it would be on the iPhone. I'd go crazy too.
Why so many folders??? When I went Exchange nearly a decade ago, I ended up only having a few folders to organize accounts. In this day and age, it really isn't necessary to have folders anymore. We have the search function and the contact list is a relational db so you can add people from specific areas into the contact categories and do a custom query on e-mails at any point.