You need to force the MIME headers to get Outlook 2003 and 2007 to show the accept/decline buttons (sorry, never dealt with anything previous to that) as they have patchy support for iCal. This href="http://www.mavetju.org/programming/outlook-ics.php" page provides a useful starter point and discussion of headers.

You'll also might want to keep in mind the fact that Outlook has its own special way of representing timezones using vtimezone if you start using those as well. The ical4j package has a directory containing them if you need these.