This is a good point, but having just designed an HTML formatted email don't discount the fact that Outlook is popular enough to gain bend-over-backwards-to-make-it-work status. Having said that, it wasn't too difficult to get it looking good.
You'd be right about that. There's another one in the Media Center division, and it happens to be much more strict with respect to standards, although perhaps not as full-featured.
There's at least 4 independent codebases — modern IE (which includes 3+ renderers), MS Word, archaic Mobile IE, and the new IE6-based Mobile IE they have in development.
I still can't believe they're maintaining two distinct HTML renderers...