Software

Your message got cut off, but I see that you edit host file to Exchange location. this is important to locate the server on the network, for Exchange uses first host, then DNS, etc.. in order to locate the exchange server.
Your clients aren't experiencing any other problems with the network, are they?
How frequently do you reboot your exchange server? Have you try it?
Have you try upgrading the O97 to O98, I beleive the upgrade is free of charge if you have O97.
Not much help here, hein?
Good luck!

I would try the following :
-Start outlook with
/cleanreminders /cleanFreeBusy and /resetOutlookBar swithes (separetly)
(see q182112 at Microsoft KB articles)
-Remove all personal folders services (and repair them if need be (with scanpst.exe)

You don't say if you are running WINS server services or not. If you are not, then this whole explanation is moot. Anyway...

We had this problem on our network and it was due to WINS corruption. When the corruption got worse, we started seeingfreezing when opening other apps like Excel and Work over the network.

The easiest way to remove corruption from WINS is to delete the WINS database and let it recreate itself. Stop the WINS server service. Make a backup copy of C:\winnt\system32\wins. Delete the contents of c:\winnt\system32\wins. Restart the WINS server service. The WINS database will then recreate itself. This may cause browsing problems on your network for a couple of hours. If you have a secondary WINS server, you should do the same to it, at the same time, or else you'll just replicate the corruption.

If your WINS becomes corrupted again, then there is a problem with the way WINS is configured. Check the MS Technet and Knowledge Base for articles on proper WINS configuratio