It appears that the retention policies are based off the message date. ex: After 90 days message date 2/1/2011 will be removed. If a user has AutoArchive setup to move messages 80 days and older, 2/1/2011 will be swept 80 days later. Unless the modified date of the message is 2/15/2011. However, it appears the retention policy will still remove the message 90 days after the message date. The question being, why are the retention policies and autoarchive dates not aligned? Messages appear that they will be deleted before they can be archived.

Retention Policies are a way for a company to make sure it's end-users are following the company's guidelines. It always takes precedence over AutoArchive. AutoArchive can be modified and changed to the user's likings. They can set when items expire according to their own means, and what gets sent to their Archived Items folder. They are not aligned because one helps the end user manage their mailbox in a reasonable manner, but as a safenet the company can ensure the end user does not abuse this feature with retention policies.

They should be aligned, or at least be able to be aligned. By your own definition if it allows end users to maintain their inbox, but ensures we don't maintain messages past date X, then Outlook should ensure it sweeps the message before the retention policy deletes the message. I've opened a PSS request and they are in agreement. I'll post back any further details. Outlook 2007 does have a hotfix for it: KB2500686 But there is not hotfix for Outlook 2010 at this moment.

Historical Thread Maintenance: Office 2010 SP1 includes the fix. The same registry setting found in KB2500686 (Replace 12.0 with 14.0) will activate the proper settings.