I noticed while working in WinXP Windows Explorer, if I select the
right hand window and there are many files that you need to scroll
down, you need to select that "side" of the window and the mouse scroll
feature works.

But to access the file folders, you need to click on a folder on the
left hand side then the scroll feature works.

With Outlook 2000, I don't need to click the folders on the left hand
side, as soon as I move the cursor between Left or Right side of the
windows, it knows which one to scroll.

Is this possible on WinXP's Windows Explorer?

seems not.
But some manufactures' mouse drivers seems to support the feature.