Mark, tthank you for the heads up for looking in the .pst settings. After speaking with RIM support today found the answer.
The Solution for the error message “Default folder not found” lies in the .pst settings.
Create a new .pst folder in Outlook.
In Order to get rid of the message "Default Folder not Found". This solution involves rearranging the Outlook directory tree so the old .pst is hidden under a new "dummy" .pst.
We want to locate and identify which .pst is currently in use.
1. Begin with opening Outlook. Go to Outlook shortcuts menu. Go to Outlook Today Icon. Right Click Outlook today. Select General Tab. Select advanced settings. .pst folder in use will show in field.
2.Create a new .pst with no email server and no email address. See link if you haven’t set up a new profile in outlook. http://www.outlook-tips.net/howto/profile.htm
2.5 Add old .pst to new .pst. Install the old profile under the new “Dummy” profile.
3.You will synch using the new profile.
4.Delete all the intelli-synch settings.
5. Close out the Desktop manager
6. Close Outlook
7. Open Intellisynch. Configure PIM