Can you setup a rule in owa to forward email to an outside email address? Does something need to be enabled on the exchange server (2007)?

What are you trying to accomplish? It sounds like a hub transort rule might be more appropriate.

really to allow users to do this when needed; the option in owa is available but does not seem to work to the outside.

You may have automatic forwards disabled. In the EMC go to Organization Configuration | Hub Transoport properties, go to the Remote Domains tab, right clikc on Default *, select Properties, go to the "Format of original message sent as an attachment to journal report" tab (The WTF of Exchange config tabs, IMHO) and see if "Allow automatic forwards" is enabled.