Outlook 2010 and Exchange 2003 sync issues

[guest]

Recently we upgraded few client computer Office packages from Office 2007 to Office 2010 (on 2007 everything works as it should).
Since then, Local Failure folder started to fill up with sync errors, unable to sync calendar, unable to categorize any mail, meetings keep poping out even after dissmis is used etc. (This item was not completely updated during the last server synchronization. Click here to review other version).
On Exchange server, there are no logs that indicate any problem with syncronization, tried reinstalling/recreating profile/rebuilding cache on client computer, starting Outlook with all possible syntaxes, nothing works.
On one machine, I got error in App log, Source: Outlook Event ID 55 - Calendar Folder New Download, and Source: Microsoft Office 14 Event ID 5000 - EventType officelifeboathang, P1 outlook.exe, P2 14.0.6025.1000, P3 mspt32.dll, P4 14.0.6025.1000, P5 NIL, P6 NIL, P7 NIL, P8 NIL, P9 NIL, P10 NIL.
How can I fix this sync issue?
Log from Local Failures folder:
9:20:48 Synchronizer Version 14.0.6025<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>

9:20:48 Synchronizing Mailbox 'xxx'<o:p></o:p>

9:20:48 Synchronizing local changes in folder 'Inbox'<o:p></o:p>

9:20:48 Uploading to server 'xxx.xxx.xxx'<o:p></o:p>

9:20:48 Error synchronizing message 'test'<o:p></o:p>

9:20:48 [0-0]<o:p></o:p>

9:20:48 Moved a message that failed synchronization to 'Local Failures'. Message subject -> 'test'. You can view this message in your offline folder only.<o:p></o:p>

9:20:48 Done<o:p></o:p>