Team Foundation Server 2008 Email Notifications – Error TF50282

I'm trying to get our current install of Team Foundation Server (TFS) 2008 to properly send Alerts and Email Notifications.

The main issue that I'm running into is this error:

TF53010: The following error has occurred in a Team Foundation component or extension:
Date (UTC): 8/18/2009 3:27:39 PM
Machine: DEV02
Application Domain: /LM/W3SVC/681929560/Root/Services-2-128950828377749110
Assembly: Microsoft.TeamFoundation.Server, Version=9.0.0.0, Culture=neutral, PublicKeyToken=b03f5f7f11d50a3a; v2.0.50727
Process Details:
Process Name: w3wp
Process Id: 4484
Thread Id: 6072
Account name: NT AUTHORITY\NETWORK SERVICE

Detailed Message: TF50282: Could not connect to the following e-mail server: 10.1.0.166
Error message: System.Net.Mail.SmtpException: Mailbox unavailable. The server response was: 5.7.1 Client does not have permissions to send as this sender
at System.Net.Mail.MailCommand.CheckResponse(SmtpStatusCode statusCode, String response)
at System.Net.Mail.MailCommand.Send(SmtpConnection conn, Byte[] command, String from)
at System.Net.Mail.SmtpTransport.SendMail(MailAddress sender, MailAddressCollection recipients, String deliveryNotify, SmtpFailedRecipientException& exception)
at System.Net.Mail.SmtpClient.Send(MailMessage message)
at Microsoft.TeamFoundation.Server.WebServiceNotification.SendOneEmail(Boolean plaintext, String to)

For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.

Docs for TFS say to edit the web.config in DIVE\Program Files\Microsoft Visual Studio 2008 Team Foundation Server\Web Services\Services

My edits to the file are included below:

<?xml version="1.0" encoding="utf-8" ?>
<configuration>
    <appSettings>
        <add key="ConnectionString" value="Application Name=TeamFoundation;Persist Security Info=False;Initial Catalog=TfsIntegration;Data Source=DEV02;Integrated Security=SSPI"/> 
        <add key="eventingEnabled" value="true" />
        <add key="DetailedExceptions" value="false" />
        <add key="emailNotificationFromAddress" value="info@tradepmr.com" />
        <add key="smtpServer" value="10.1.0.166" />

<!-- Optional Alert Settings
     AlertUseReplyTo: True, False (default: True). Specifies that the ReplyTo property of the 
                 email alert should be set. When false, the From property is set.
        <add key="AlertUseReplyTo" value="True" />
-->
    </appSettings>
    <runtime>
        <assemblyBinding xmlns="urn:schemas-microsoft-com:asm.v1">
            <probing privatePath="bin\Plugins;bin\Plugins\zh-chs;bin\Plugins\zh-cht;bin\Plugins\de;bin\Plugins\es;bin\Plugins\fr;bin\Plugins\it;bin\Plugins\ja;bin\Plugins\ko"/>
        </assemblyBinding>
    </runtime>
    <system.web>
        <!-- Enable the HttpHandlers for file upload and download -->
        <httpHandlers>
            <add verb="*" path="methodology.asmx" type="Microsoft.TeamFoundation.Client.MethodologyDownloadHandler" />
            <add verb="*" path="methodologyUpload.asmx" type="Microsoft.TeamFoundation.Client.MethodologyUploadHandler" />
        </httpHandlers>
    </system.web>
</configuration>

Some things I am wondering are this:

1. How should exchange be setup?
   • We're running Exchange 2007
   • I'm almost sure that anonymous sending is setup
   • Are their any repeater requirements
2. How should TFS be setup?
   -Should the smtpServer attribute be an internal IP or the fully qualified local domain name?
   -What should the emailNotificationFromAddress be?
   – I've tested with one that we know works (web app sends to it), but I'd like the from name to be a distribution group so that team members can reply all when necessary. (I think that would require uncommenting the AlerUserReplyTo key, but I'm just trying to get emails to work period).

Any input would be awesome! Thanks!