Outlook permits users to create and access multiple calendars. When you install the iCloud add-in for Outlook (including the Calendar sync option) a new Calendar is created, called "Calendar in iCloud." After installing the iCloud add-in, when you click on the "Calendar" button (lower left portion of Outlook 2007, which is the version I have) the sidebar on the left of the screen lists "All Calendar Items" and "Calendar in iCloud" is listed there, along with Outlook's previously-installed (default) "Calendar" (which is listed under "My Calendars").
It appears to me that when the Calendar in iCloud is created (i.e., when the iCloud add-in is installed), everything that can be transferred from the user's default Outlook Calendar is automatically copied to the new "Calendar in iCloud." It appears that some things (notably recurring events) cannot be transferred automatically. You have to create new recurring events in the Calendar in iCloud.
Now here my perception of the key limitation regarding syncing calendar events between Outlook and iCloud: It appears that only the "Calendar in iCloud" is synced with iCloud. So if you want to use Outlook to add a calendar event and have that event show up on your iCloud-enabled device (e.g., you iPhone) you need to add it to the Calendar in iCloud. It will not show up on your iPhone if you add it to one Outlooks "My Calendars." Similarly, and calendar event that you create on your iPhone will only show up on the Calendar in iCloud.
If you want to have every calendar event synced through iCloud, it is easiest to uncheck every calendar in Outlook's "All Calendar Items" except for "Calendar in iCloud." Then you will only be working with that calendar in Outlook, and everything will sync.