While I did manage to get the Outlook sync through outlook.com working with above mentioned "All Events" trick - I did not like the sync part on the Desktop side (You had to do a "send/receive" to get appointments synced with outlook.com).
So in the end - I ended up going with a completely different solution through google calender:
1) Install "GO Contact Sync Mode" (it is a free public domain tool which syncs google calenders with outlook).
2) Set up iphone to use google calender.
Now the syncing is SMOOTH as ever. You can change sync frequency in GO Contact Sync Mode tool to any amount (I have currently set it to 15 minutes) and it will sync automatically in the back-ground.
Just to explain the complete setup - Outlook calender is now synced with google calender (on google.com). And iPhone calender is also synced with same google calender. Any changes in Outlook are reflected on your phone (via google calender) in about 15 minutes and vice versa (you can change 15 minutes to any duration you want).
Just in case this helps someone else. Also if you cannot get outlook.com based sync working anyway - than this maybe worth it.