Hi Joe,
Thanks for posting your question.
It certainly seems like a design issue with the searching of inactive contacts in the Outlook client. There is an investigation in progress with the development team to change the design of the search in Outlook.
Currently when conducting a search while in a different view such as inactive contacts, the search line displays "Search Inactive Contacts". This is misleading, as you have witnessed, it doesn't search inactive contacts. Rather the search is being conducted as a quick find search no matter what view is present.
The proposed change to the development team is to remove the label of search inactive contacts, and produce a different view when the search is completed. This way the confusion of the search criteria will be averted.
This above explanation does not detail why the search produces the correct results when adding in the filter of the fullname. Let me explain what is occurring when you add the fullname filter and receive the results of the inactive contacts.
The filters being applied are not for the search, but are being applied on the view. When you add in the fullname filter, it is adjusting the inactive contact view, to retrieve inactive contacts with the fullname as specified. You will notice when completing the steps of adding in the filter for the fullname of the contact, that the search icon (magnifying glass) will be present still on the search bar. If you select the icon, it will conduct the search for active contacts, and you will lose the results that were previously retrieved.
As noted previously in a different reply that the search in Outlook has been updated to act more like the search in the web client. The search is using the criteria defined in the quick find view settings. As a test, I added the inactive status into the filter criteria of the quick find search for contacts within the customizations of CRM 2011. After reconfiguring the Outlook client, I was able to search for both active and inactive contacts using the search bar in the Outlook client.
In short, there will be a future update that will change the labeling of the search functionality in Outlook. Currently the settings are misleading as it appears to be searching on the current view. This is not the case, rather the search is being conducted with the filter criteria of the quick find search view for that entity. Also, I noticed when adding the filters in Outlook, it appears the filters are being applied to the search. In reality the additional filters being applied are only for the view.
The instance where the search was functioning in the manner of the context of the view on a different workstation may have been due to the update version of the Outlook client rather than the version of Office being used.
Hope this explains the issue a little further,
Al Ericson