First you will need to define your Local Data (so which contacts you will be synchronize with CRM). Default settings is that it will be only your contacts (those created by you or assigned to you). If you will define your Local Data you should see some contacts in your Outlook and they will have different icon in the Detailed View.
If you will have synchronized contacts visible in Outlook right settings regarding Tracking emails should be working.
You can also use the Diagnostic Wizard to see if there are any issues impacting your ability to communication with the CRM server from your Outlook Client.