I am having a similiar problem IIS/7.0, When I set mail to smtp, the mail says it's sent but never gets received on the other end, I also get no order confirmation e-mails. I have another store using Zencart on the same hosting company with all the same settings except it uses Linux and all works well there.

I would like to switch to Linux but I'm not sure how that will effect my store at this point since it is all set up already?? I would have chosen Linux in the first place but the site is eventually moving to a IIS/7.0 server and I wanted to avoid conflict when it is transferred.

Any help is greatly appreciated! Hosting Company say they can't help with 3rd party products.

Without e-mail I have no store.