Uncomment (remove the //) this line in admin.php:
// $smtp_debug = '1';
The SMTP debug log is now written to a text file in your ./attach directory. (You may want to employ the security mentioned
here). Send a message, recover the file via FTP, and email it to me and I'll be able to tell you more about the error. Alternately, set up a tech support request of the type Other (
here) and I'll take a look.
Regards!