Here are the instructions and I believe the first step is your issue. It needs to be hosted on Exchange and not just have the pst’s on the server.
<b>This feature requires you to use a Microsoft Exchange Server e-mail account.</b>
You can share your e-mail, calendar, tasks, notes, and journal with other Outlook users as long as you both are using a Microsoft Exchange Server in the same organization.
To share any other folder other than the Inbox, Contacts, Calendar, Notes, or Journal, you must share permissions on the folder you want to share and each folder that is higher in the folder hierarchy. For example, to give another person access to a folder that is under Inbox in your mailbox, you must grant permissions to the Mailbox, Inbox, and the subfolder. Even though it might appear you’re granting the other person access to more folders than you want, only the items in the Inbox subfolder will be available.
Sharing folders should not be confused with Delegate Access, another feature available to Outlook users who connect to a Microsoft Exchange Server. Delegate Access provides the additional functionality of allowing another person to send and reply to messages in your mailbox on your behalf. You would use Delegate Access with your administrative assistant so that they can send and reply to e-mail messages on your behalf, including scheduling and accepting meeting requests.
Share a folder
1. To share an e-mail folder, in the Navigation Pane (Navigation Pane: The column on the left side of the Outlook window that includes panes such as Shortcuts or Mail and the shortcuts or folders within each pane. Click a folder to show the items in the folder.), click Mail.
On the Go menu, click Folder List to display the folders in the Navigation Pane.
2. Right-click Mailbox – your name, and then click Sharing.
3. Click Add.
4. Select the other person that you want to give permissions to, and then click Add.
5. Select the person’s name in the list, and then for Permission Level, select Reviewer.
Sharing properties dialog box
6. Click OK.
7. Right-click the folder you want to give the other person permissions to view, and then click Sharing.
8. Click Add.
9. Select the other person you want to give permissions to, and then under Add Users, click Add.
10. Select the person’s name in the list, and then for Permission Level, select Reviewer.
Note If you want the person to be able to change items, select Editor.
To share a folder that is not directly beneath Mailbox – user name, like the Inbox, Contacts, Calendar, Notes, or Journal folders, you must do the following on each folder that is higher in the folder tree.
1. Right-click the folder, and then click Sharing.
2. Click Add.
3. Select the other user you want to give permissions to, and then under Add Users, click Add.
4. Select the user’s name in the list, and then for Permission Level, select None.
Callout 1 The top folder, Mailbox – Your Name, must be shared to share any folder beneath it.
Callout 2 The Inbox folder must be shared to share any of the folders beneath it, such as the Prospective clients folder. You can set the Inbox folder permissions to None to prevent others from viewing the contents.
Callout 3 The Prospective clients folder should have at least Reviewer permissions for other people to view the contents.
Open shared folders
1. On the Tools menu, click E-mail Accounts.
2. Click View or change existing e-mail accounts, and then click Next.
3. Click the Exchange Server account, and then click Change.
4. Click More Settings.
5. On the Advanced tab, under Mailboxes, click Add.
6. Type the other user’s name, and then click OK twice.
7. Click Next, and then click Finish.
You might need to quit and restart Outlook for the other person’s folders to appear in your Navigation Pane.