OK, I found the solution to this after spending about 2.5 hours on the phone with Apple Care yesterday in which we went through a whole bunch of troubleshooting. I'll mention the steps we took here:
-We created another user account in Windows and tried doing an iCloud sync with Outlook. That worked fine, although it was not a solution as I have all my settings/programs in my main account.
-We then went back to my user account in Windows and through msconfig, tried to do a bare-bones startup to see if there were any programs that were launching on startup that were conflicting with iCloud setup. There weren't.
-Finally, we figured out that the main difference between the Oulook on the main user account and the new user account in Windows was the fact that the Outlook file in the latter was empty.
SO, what we decided to do was delete all the contacts in my Outlook (after backing them up, of course), then trying iCloud again. At this point, all the contacts that were on my phone/iCloud account were transferred back to Outlook and everything now works like a charm. It appears that the issue in question was that there was miscommunication of some sort between the contacts that were in my Outlook and the ones in iCloud.
You may want to try this solution. If you do, let us know if it worked as well for you as it did for me.