Francois Wolmarans answer is absolutely right (and I'm upvoting it). There's no native "download POP3 and jam it into Exchange" functionality in Exchange 2007. You can use third party software to perform this function (I've successfully used the cygwin distribution of fetchmail running as a "Scheduled Task" on a Windows server...) or, alternatively, you can continue what you're already doing-- using the POP3 client in each Outlook client to download email and jam it into the user's mailbox.
Basically, as you establish a mailbox for each user you'll need to create an Exchange mailbox, import their existing .PST into the Exchange mailbox, and change the default message delivery location in their MAPI profile from the PST (which you'll ultimately disuse and delete) to their Exchange mailbox.
You can allow Outlook's SMTP client to send out messages or you can use Exchange. You can control this behaviour by changing the order of the accounts in the "E-Mail Accounts" properites. Personally, I'd only allow my Exchange Server computer access to the Internet via TCP port 25, and force all clients to send email via Exchange. (If all your clients are already configured to send email directly out to the 'net this poses a bit of a problem during the migation, but it's a good goal to shoot for by the end of the migration.) This prevents malicious software or attackers from sending email to the 'net w/o having credentials to have Exchange do the relaying for them.
Finally, you'll need to configure your domain in Exchange as an internal relay domain so that your users who have been migrated to Exchange can still send email to un-migrated users via the ISP's mail server (assuming you're not migrating everybody on one fell swoop). (That article is SBS-oriented, but it absolutely applies to non-SBS Exchange installs where you're maintaining existing POP3 outside on an ISP but transitioning to internal Exchange...)