I'm using CS3 (you do not mention what system you are using, etc) and I cannot replicate your problem. If I outline the dotted stroke it does outline correctly.
You may need to reset your preferences.
I think they fixed this in CS3 so that outline stroke worked, but before that I think it was object -> expand appearance that would do it.
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It was Object > Flatten Transparency, Jesse.
Dangit. That was my first thought too, but I thought it was wrong.
Thank you Jesse it works but there is a little different. It works by "Object > Flatten Transparency" on CS1 Macintosh version and it works by "Object > Expand App.." on CS4 Windows version.
Thx a lot.