Iis – Forwarding all mail to a single dev box on IIS via virtual SMTP

Howewer you configure it, Exchange is not going to route a message outside the organization if the destination address belongs to someone in Active Directory. Whenever Exchange needs to route a message, the first step it tries is always to look for the destination address in AD, and only after this fails it will choose a proper external routing path, based on the connectors you define.

With Exchange 2007 you can have "shared" SMTP domains, i.e. domains for which some addresses may be managed by Exchange, and some other by another system (in a coexistence scenario); I don't know if/how this is possible with 2003, but even if it was, the above stated golden rule still applies: first thing first, Exchange will try to deliver the message internally, and only if it can't, it will send the message outbound.

Think about it: if there was a way to do what you ask, what would Exchange do when receiving a message for a given user (even if it was already being forwarded by your provider)? It would route it back to your provider. There is no way to route messages based on who sends them, only on their destination; and the destination would be the same when the message is coming from Exchange itself, or when is coming from outside: if your wish could come true, you'd be stuck in a mail loop.

Rather than poking at a black box and wondering why it won't work, install "Network Monitor" or Wireshark on the SMTP relay machine and sniff some SMTP traffic. You'll find out in about 30 seconds why your mail is being rejected. That's going to be your path of least resistance. The box wants to tell you what's wrong, you just need to look.

Your "network engineer" should've reached for the sniffer earlier, IMO. Sniffing the traffic on the wire seems "taboo" to some people, but it's often the best way to get to the bottom of a problem in a human-readable protocol like SMTP.