That was by design. From what we observed in Outlook, when you drag the splitter, it's dragging a shadow and not really resizing live as the mouse moves. When the splitter is dragged and released so that the NavBar is made small enough, we believe there is separate code in Outlook that changes to the minimized state. Likewise when the splitter is dragged and released in a larger width, there is code the seems to toggle it back to expanded.
Unfortunately with Grids in WPF, it's doing it all live so there may not be a chance to catch this size change. Perhaps we can look into some sort of auto-toggle option for the future though with a threshold minimum size that triggers the switch.