I used to have Word set as my email editor for amongst others to easily set tabs. Outlook 2007 and Outlook 2010 apparently only use Word as the email editor but I don't see the ruler to set the tabs.
Has this feature been dropped?
Indeed, Outlook 2007 uses a new email editor that closely resembles Word; it's actually based on it and shares a lot of features. This is the same in Outlook 2010.
The Ruler function can be easily overlooked but it is on the right side directly above the Scroll Bar. Click on it to make it visible. Once selected it will automatically show on all new messages until you turn it off again.
Click on the small Ruler icon to enable it.
Note: In Outlook 2013 and Outlook 2016, the Ruler function is even more hidden but is still there. To access it see: Showing the Ruler and Tab Stops in Outlook 2013 and Outlook 2016.