I agree that he has a problem with alignment or torque balancing eating the tires and that could be the cause of the burning smell. However, I too have a 97 outback (manual transmission) that does the same thing, minus the eating of tires. I get many years out of a set of tires. Also, I replaced both front axles last year so there are no leaking boots and had the front end completely gone through after that. I also cleaned the engine after doing all the work.
I too get the burning rubber smell after pulling a hill and stranger yet, it only happens when its cold (as was alluded to) and never in the summer time. It did it again last week during a cold snap after pulling a hill to a friend?s house. I have popped the hood and the smell is much stronger under the hood and obviously is not coming from the catalytic converter. The belts look to be fine and there is never any squealing so I doubt they are the problem (but I can?t totally rule out the possibility). Being that I don?t pull many hills where I live I have yet to nail this one down.
Thought I?d throw that little curve ball into the mix.