Steam will force the 64-bit version of the game, even if you launch 32-bit directly. So you have 2 options.

1. Rename Outlast\Binaries\Win64 to something else, and then rename Outlast\Binaries\Win32 to Outlast\Binaries\Win64 This should launch the 32-bit version

2. Go to \Outlast\Binaries\Win32 and make a shortcut of the outlast executable (OLGame.exe). Then, on the shortcut you just made right click it and then go into properties. You'll see a box at the top called target, at the end of that outside of the quotes you want to write -nosteam. Launch the shortcut when done.