What exactly does the message say?
I know people who have Hotmail IDs which are basically the same as Outlook, so I doubt that is the issue.
Apple does restrict re-use of email addresses people have used before with Apple.
From: Change your Apple ID - Apple Support
“Keep in mind that you can't use an email address that's already in use by another Apple ID.”
"If you see a message that the email address you want to use isn't available or is already in use, check that you or a family member aren't already using that email address with a different Apple ID. If a family member is using that email address, remove it from their account then try to use it."
Although this next section discusses email address re-use in the context of deleting an account, it supports observations frequently posted on this forum about never being able to re-use an email address as an Apple ID once used previously as an Apple ID:
From: How to delete your Apple ID account - Apple Support
"Can I use the primary email address for my deleted Apple ID account to create a new Apple ID or with another existing Apple ID account?
No, once your Apple ID is deleted, you can't use the email address that you used with it to create a new Apple ID. In addition, you can't use that email address with another existing Apple ID except as a rescue [notification] email. Also, if your primary Apple ID email address is with a Custom Email Domain, it can never be reused to create an Apple ID after your Apple ID is deleted, even if the domain ownership changes."
* I take that to mean you can use the address as a notification address, but the reverse–using a notification email address as an Apple ID–is not possible.
