Using IMAP and Oultook cold be the best way to read mails as its a synchronized or call it as both ways. You change in outlook and it gets reflected on your Gmail account or vice versa. I started using Outlook 2007 and Gmail IMAP service like 2 days back. The most irritating part I found was All the labels also get listed along with the default folders of Gmail ( Inbox, sent etc ).

Now in case you have lot of labels the folder list on the left navigation panel becomes too long. For me I don’t search labels all the time even if they are listed there its useless for me. So this is what I did to remove or you can say hide of those Labels to show in my outlook 2007.

• Tools -> Account Settings -> (your Gmail account) -> Change -> More Settings -> Advanced
• Set Root Folder Path to “[Gmail]” without the quotes .
• If you are set to work offline,  get online first and then right click on Gmail Folder
• Click on Update IMAP folders.
• Now you will the list of folders gets reduced to All Mail, Inbox,Starred, Inbox i.e Now you see only standard Gmail Folders.

Here is an example of my 2 Gmail accounts one with and one without root folder settings. This way I am able to remove the gmail labels from outlook folder list. However there is one drawbacks in case you want labels it wont show up. I am working on this so I can only see particular folders only.