Firstly is this correct? Should it be taking all the files down to the PC to install?
Yes. If not the exe/msi will not be able to find the associated files from the install (cab files etc) and will fail since only the main EXE/MSI will be cached locally.
Secondly, if this is the case, how can I automate a cleanup from the local drive to delete the installation files?
This is done automagically by LANDesk every 2 days.
Depending on your version you can experiment with the Run from Source to deploy files.
In addition to zman's comments: if you only want the Outlook 2003 client, you may want to see about getting your hands on just the Outlook 2003 install. We do this in our environment where we may have Office 2003 on the machine, but we will deploy the Outlook 2007 client seperately as Outlook is covered under our Exchange SA agreements with Microsoft and includes Outlook. May want to see if you can get your hands on just the client install from Microsoft.