WordPress MU

This is a head-scratcher for me:
I have installed MU with directory-based blogs. I am running on Win2K3 (don't ask!) with Apache. My SMTP server is NOT on the same box.
I can telnet to port 25 on my mailserver and perform EHLO etc to send sample email.
I change the "Mailserver url" in MU to the correct server and changed the port number too (defaults are example.com and port 110).There is no login or password required to send on our server.
The issue is, MU itself will not send ANY emails.
I have looked at the wpmu-functions.php file and all looks okay.
I am curious, is it possible that MU cannot handle email domains that are of the format user@domain.extension.tld ?
Otherwise, is there ANYTHING that anyone can suggest that I could try to get this working?
Any thoughts would be most welcome!

Interestingly, as a test, I installed this plugin: http://wordpress.org/extend/plugins/wp-mail-smtp/

This plugin - though not designed for mU specifically - will actually cause emails to be sent.
So, my question now becomes this:
Are the 'mailserver URL' and 'mailserver port' values only available for non-SMTP mail transport? It would appear so, since the purpose of the plugin is to allow SMTP as the mail rather than sendmail or other.
Can someone, anyone, confirm that MU does not support SMTP out of the box?

cheers

MU does NOT support SMTP out of the box. It supports Pop3 and that only to recieve new email, not to send them. Wordpress by it self does that as well.

You need the smtp plugin to use smtp :)!