This error occurred when I tried to start the CRM 4.0 client on a terminal server. The client stopped loading with the error message:

"An error occurred loading Microsoft Dynamics CRM functionality. Try restarting Outlook"

And in the toolbar it said:

Initializing MAPI sub-system

In the eventlog I got the following error:

Event Type:    Error
Event Source:    MSCRMAddin
Event Category:    None
Event ID:    5975
Date:        2009-02-26
Time:        00:41:04
User:        N/A
Computer:    CRMSERVER
Description:
An error occurred initializing a process that triggers Microsoft CRM actions based on Outlook events.  Some synchronization or tagging actions may not occur.  Try restarting Microsoft Outlook. HR=0x8007007e. Context=. Function=CAddin::HrActivateAddin. Line=697.

For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.

I think the problem was due to the fact that Microsoft CRM 3.0 had been installer on the server and there was something left in the users profile.

The solution to the problem was to delete the local profile for the user in My Computer > Advanced Settings

Links:

http://www.microsoft.com/communities/newsgroups/en-us/default.aspx?dg=microsoft.public.crm&tid=2b7957c4-d0fb-4689-918e-c3ab91736c42
http://support.microsoft.com/kb/948312
http://support.microsoft.com/kb/949087