I think the key words in the detail of the problem you are experiencing is that the user with this issue was upgraded to Outlook 2007. If the PST file in question was created in a version of Outlook prior to Outlook 2003, then it is still in the old format. Upgrading the software gives the ability to have PST files up to 20 GB in size, but it does not reformat the existing PST files.
Since a PST cannot be 'converted' to the newer format, you must create a new, empty PST file in the Outlook 2007 format (it is the default type selected in Outlook 2007 when you create a new PST) and then import all of the items from the older PST into the new one. You could do this manually by copying each folder one at a time to the new PST, but it is easier to use the Import command found in Outlook's File menu.
If Outlook will not let you import the old PST file due to its size, you may have to manually move at least 1 or 2 folders first, assuming that Outlook can still open the PST and you can access its contents. Then you will need to compact the PST file to shrink the PST size before you can import the remainder of the contents.
If you cannot access the PST file at all for import or manual moving due to its size, you will need to find a way to handle the large PST outside of Outlook. That's the situation I am currently in. I found a piece of software that looks like it may do the trick, but since I haven't yet used it, I can't say for sure. I'm running it on the PST file I am having problems with now, and am keeping my fingers crossed. This is what I am trying: http://www.outlook-pst-repair.com/.
Good luck with your issue. I hope this helps a bit.