Ok, here is what probably happened. You most likely had Outlook set to sync with MobileMe, and your iPad set to sync with MobileMe. This is good. Everything should sync to one source. When you also chose to sync the iPad to Outlook through iTunes, it suddenly tried to keep up with two sources. Worse, it would make changes to Outlook, which would change MobileMe, which would then change the iPad, which would change Outlook...
A loop that would have gone totally out of control, except it only happened each time you did a sync with iTunes. Contacts that seemed to duplicate after the fact were probably just catching up via the web syncing. That can take a while sometimes.
So, the solution.
First, never again turn on Outlook syncing in the info panel for either device. This is a manual sync that should only be used by itself, when it is the sole source for content.
Turn off Contact syncing on your iPad for now. Turn off contact syncing for your iPhone as well, but keep the contacts as a safe backup for now.
Now, make sure you've got Outlook and MoibleMe set up to sync properly. Here is the setup page from Apple. I can't help with this because I don't have Outlook.
MobileMe Help: Set up MobileMe syncing
In MobileMe (me.com), or Outlook edit your contacts until you have them the way you want, deleting duplicates, whatever. Make sure all changes are reflected the way you want in both places. That may take a while as things get synced.
Now, in the account settings on your iPad turn contacts back on. After a while it should duplicate your me.com address book.
When you are absolutely certain the iPad is working correctly, go ahead and turn the contact syncing back on for the iPhone. When given the option let it overwrite the contacts, or you'll end up with duplicates again.
Disclaimer: this is a best guess procedure. As I said, I can not duplicate it exactly. This is how I'm set up, but I use Mail on an iMac, not Outlook, so there is room for problems to crop up. So take each step, and check to make sure things are working right before going on.
BTW, you should to into iTunes Preferences, the Devices tab, and turn off auto-syncing. This will prevent the devices from trying to sync before you can make changes to the Info tab.