The insert key being used to control overtyping was disabled in this versions due to support issues.
This function can be restored by following one of these procedures:
For Outlook 2007:
Click “Tools”, then “Options”, then the “Spelling” tab, then “The Spelling and Autocorrection” button, then “Advanced” (on the left side pane), under the “Editing Options” check the “Use the insert key to control overtype mode.” Do not click “use overtype mode” under submenu or insert key will be disabled. You will now be able to use the Insert key once you return to typing your document.
For Outlook 2010:
First start a new message and then click “File”, then “Options”, then “Mail”, then “Editor Options”, then “Advanced” and then check “Use the Insert key to control overtype”. You will now be able to use the Insert key once you return to typing your document.