[Follow-up post from my earlier post: http://mindsharpblogs.com/kathy/archive/2006/12/23/1437.aspx]
Update: February 19, 2007 - Interim solution for SharePoint e-mail alerts - Exchange 2003 with Outlook 2007
grayghost suggested in a comment to this post that the cause of the SharePoint alert e-mails not displaying may be related to a corrupt OST and that by turning off the “Cached Exchange Mode“ in the mail profile may fix the issue.
Well, I tested this and sure enough by turning off Cached Exchange Mode you are able to then view alert e-mails. So I'm posting some follow-up instructions here for those people who contacted me separately via e-mail and for anyone else only just coming across the issue, in case you wish to consider using them as an interim solution ahead of the hotfix.
To switch off Cached Exchange Mode, you'll need to modify your mail profile on your computer. To do this:
Click Start > Control Panel > Mail
On the Mail Setup - Outlook dialogue, click Data Files...

On the Account Settings dialogue, on the Data Files tab, click Settings...

On the Microsoft Exchange dialogue, click the Advanced tab and on the Advanced tab uncheck the Use Cached Exchange Mode checkboxes. Click OK.

If you see the Microsoft Office Outlook dialogue - “You must restart Outlook for these changes to take effect“ - click OK.
Back on the Account Settings dialogue, click Close and click Close again on the Mail Setup - Outlook dialogue.
If you have Outlook open, close and restart Outlook.
I found that I was still able to view the e-mail alerts after re enabling Cached Exchange Mode the following day
</end update>
Summary: Microsoft are aware of the issue and are working on a hotfix, expected out end March. Thanks to Mark Taylor from Panasonic for letting me know via e-mail of the expected timeframe for the hotfix.
Scenario: Unable to open SharePoint 2007 e-mail alerts in Outlook 2007 RTM client, instead get a “Cannot open this item” error dialogue. But can view the alerts in OWA and can view other SharePoint messages in Outlook 2007, such as the welcome message and workflow e-mail notifications. Seems specific when running Outlook 2007 with Exchange 2003.