Outlook 2003 can’t send email outside of domain

Okay, once again I’m baffled with an issue that I’m hoping one of you can help me solve. Here’s the deal…

Configuration: Microsoft Office XP (Outlook 2003) on a Windows XP (SP3) system connected to a POP3 email host.

Symptom: Sending an email to anyone@example.com works as expected. Sending email to another domain (MSN, Hotmail, GMail etc.) never arrives at its destination.

Why I’m stumped (workflow):

1. Email can be created with or without Word as my default email editor.

2. Clicking Send/Receive produces the familiar “1 of 1 email being sent” and the process completes 100% without any error message.

3. Prior to the Send/Receive process the email does sit in the outbound queue (Outbox).

4. After a Send/Receive the email is moved to the “sent mail” folder.

5. Removing the Office installation, deleting all Office registry entries and reinstalling allows it to work temporarily.

6. Starting Outlook in safe mode seems to always work (at this point) but obviously not the solution I'm looking for.

7. The only two addons listed in the Outlook settings dialog box are for Symantec Antivirus and Exchange. I’ve disabled both with no effect.

8. I’ve searched the “addons” key in the registry and it shows no addons installed.

9. Since “safe mode” seems to work, I suspect there’s a rogue executable at play here. Virus/Adware scans have not turned up any results.

10. Outlook Express can be configured with the users credentials and performs flawlessly. This rules out any network / server / IP Block issues.

11. User can send email to self or other users sharing the same domain name

So… I’m baffled! I suspect a full reformat and reinstallation will solve the problem.

EDIT: Note read the problem carefully, the email gets sent fine when in safe mode, or using the same account on another machine.