I experienced the same issues and shock when first seeing that iCloud transferred all my calendar items and contacts to its own directory. There are certainly some compatibility issues between both setups, but here are some observations I have found from my own tinkering. By the way, my iPhone is 3G and we have iMac (Lion) and iPad, so a mix of iOS 4 and 5.
1. In outlook, iCloud calendar does not display reminders in the "to do" bar, which I use exhaistively. I manually checked the boxes for both iCloud calendar and Outlook's "My Calendar" to show them side by side, then manually went in to "drag and drop" (Copy) from iCloud to Outlook. This defeats the purpose for total synch, but I figure gets around the issue of day to day operating until a fix can be figured out. This of course means that every new calendar entry in iCloud needs to be duplicated for now.
2. Contacts in iCloud do not include the Outlook Category field, which is a pain. Neither does it bring across all reminders such as birthdays or anniversarys. Again, defeating the purpose, if yoiu select all your contacts within iCloud (I have some 3,000+) and paste them back into Outlooks default, then all fields have been maintained, including categories etc. Again, going forward this requires a duplicate effort in both contact sets to maintain the sync with other iOS devices, while maintaining an outlook view of the world.
Unless one does both of these things, then reminders of events and schedules do not happen.
I do not plan on even tackling the email issue.... this would be too much for my brain to handle at this point.
Hope this helps someone
Eddie