"I have Office 2003 and I have a question about Outlook. Is there a way to attach an incoming email to a contact like you can in ACT! I want to try to avoid making a folder and just attach it to the contact."

Yes! Just create a contact for the sender. When you open the contact and look on the Activities tab, you'll see a history of the messages sent to or received from this person. You can also enabling journaling for this contact so you'll have a record in the journal folder too.