The Directory Synchronization Tool (DirSync) is supported on Windows Server 2008 SP1 and higher. However, the Password Sync feature introduced in the latest version will not function correctly if installed on an OS older than Windows Server 2008 R2 SP1 (Windows Server 2008 R2 SP1 itself is supported).
When this is the case, you will receive the following error:
Password synchronization failed for domain: <your domain>.
Details: System.IO.FileLoadException: A procedure imported by 'Microsoft.Online.PasswordSynchronization.Cryptography.dll' could not be loaded.
To resolve this issue, install the Directory Sync tool on a supported Windows Server OS.