"we use it so that each user can update their contacts without loading the entire crm database down?"
Yes, you can define a filter limit the result set, you can use also a VIEW in database (can be also readonly)
"Secondly I just want to confirm that can do updates of outlook without updating the database."
Yes, do not use Auto.Save option
"I believe a load all would update all the records in the outlook database?"
Yes, load all will upload all records from DB to Outlook
"can I disable the buttons on the screen?"
Yes, you can remove the buttons, see help topic:Customize Toolbar
You can also use a read only login, to prevent any update