I've seen these before, as recently as a coworkers (Hi Louis) desktop so it was worth documenting.
Issue 1:
1. When connecting to OWA (Exchange Webmail), when composing a new message, a red x appears in the body area of the message, as though it wasn't accepting an activex control or otherwise. Popup blockers were not to blame.
... Had to choose options in OWA and download and install the S/MIME control. Now, creating a standard email should not requiring a tool needed for signing or encrypting an email but ... whatever ... it worked, first time
Issue 2:
2. After getting the above control working, then IE7 would crash completely when I clicked send after composing a message (Come on Microsoft, you can do better than this by now!?).
... had to install a patch on the Exchange Server (2003) in order to stop this problem from happening (did not require a reboot for those of you wondering). The Patch
Great tip thanks! This is driving me crazy so will have to try this out.