I found a solution that seems to work (I'm using Outlook 2007). Say you got an email and you hit reply. Looking at your reply email with that blue indent line click on the "options" pull down menu and then change the format to "Rich Text". Enter your reply in the body of the email and select your reply line or paragraph and then ctrl-Q. The blue line for that paragraph or email is gone. I tested this by sending the email back to myself and it seems to work.
If the format is HTML it won't work... although ctrl-Q seems to remove the blue indent line when I send the email back to myself the line comes back. But in Rich Text format the solution sticks...
