It seems that when an All Day Event is created in EM Client it gets syncd to Outlook.com with the All Day Event flag ticked but duration is empty. This does not seem to be a problem for Outlook.com but when I sync Outlook.com down to an Outlook 2010 desktop client it shows as a 12am event and not an all day event.
What happens if you create an all day event using the web interface for Outlook.com. How does that display in MS Outlook?