I cannot add to blocked senders. The menu option has little red cricles with a line through them. Does mean I have maxed out of senders I can block? Now do I fix this (Outlook 2007)

Yes there is a limit. The limit is 2000 names on all Safe & Blocked lists combined.

I tried clearing some entries from the list, but that did not remove the blocking. Does the blocking remove itself once I get the list down small enough? Can I update the number of entries permitted?

Now I also get that little red circle with line marking my junk file folder. Does this mean I have to forget using Microsoft Outlook and to to a real email program like Thunderbird that has strong support as well?