This is absolutely correct. Not using the all day event option would also fail sometimes.This problem is related to outlook more than exchange server or OWA. This is a little complex to explain but I will try.
When user A in eastern time books the calendar for a span from 11:59:59 AM to next day same time it looks correct in his/her own calendar because outlook will show it for a whole day. But, when the recipient or the attendee (user B) in another time zone recieves this appointment and accepts it, it is added to attendee's calendar. Now, for user A 12:00 AM to 12:00 AM works fine his calendar but when User B looks at own calendar it spans because of the time difference of 1 hour or so. So, 12:00 AM in CST would be around 01:00 AM in EST outlook thinks that the time specified in the meeting request should be shown as it was marked by the organizer. and spreads it across two days 1:00AM today to 1:00 AM next day and hence it appears spanned across two days. I hope that explains it. If you did not find it satisfactory do add a comment. I will try to rephrase it again.
M