conversation view?

[Magritte]

In the Outlook 2007 help it shows that you can sort your mailbox by
conversation that that messages within the conversation should be
sorted and indented by thread (who replies to who). I'm trying to get
this to work with my Gmail IMAP account. The messages are grouped into
conversations, but they are not properly threaded. There's no
indentation at all and the sort order is just wrong (neither sorted
correctly by reply or by date).

Does Outlook only sort conversation correctly when you're not using an
IMAP account or is there some way I can fix it?

Thanks!