So you click on a mailto link to create a piece of mail within an Outlook message pane and you get "Can't create the item". I don't know why it's a problem but its a bad FRMCACHE.DAT file.
Close Outlook. Go to Windows\Profiles\username\LocalSettings\Application Data\Microsoft\Forms to find it, assuming you have already set Explorer to show Hidden Files and Folders. Delete it. Problem solved.
Here is the link to MS kb: http://support.microsoft.com/default.aspx?scid=kb;en-us;267807
So far I've encountered it only on Win2000 with Office 2003. Let me know if you find a pattern.