Found the solutions!!!!
You need to change the IMAP banner on your exchage 2007 IMAP reciever:
My *problem* Exchange 2007 server was displaying the following banner:
"* OK The Microsoft Exchange IMAP4 service is ready."
and it should be
"* OK Microsoft Exchange Server 2007 IMAP4 service ready"
To see what your banner is telnet to your exchange server port 143 and it will show your banner.
FIXED