I too encountered this same error. The microsoft help page descibes the situation perfectly, but they seem unsure of what the problem is. I am currently using a Compact ipaq until I get my Axim, and I found one site...
http://www.computing.net/pda/wwwboard/forum/327.html
which claims the problem is with ActiveSync not working with Outlook Express. This doesn't make sense considering their both MS products, oh wait...
It did point me in the right direction though. I unchecked inbox from the sync options and everything else synced just fine. However, no inbox :(