emails are successful going to the known domain, others going outside fail

[pjbonarrigo]

I can perform test orders where the store and buyer are in the known email domain. Order confirms send to store admin and buyer fine.
Confirms going outside the known domain result in an email error.
If Email Transport is set to PHP, error is:
Error: failed sending email to ...
Could not instantiate mail function.
Please check admin->config->email options->email transport.
If Email Transport is SMTP, and confirm going outside domain:
Error: failed sending email to ...
SMTP Error: The following recipients failed....

I have my SMTP Host and Port set.
Does the SMTP option require this or just SMTP Auth?

I then tried a more basic test which is:
Tools->Send Email
With either PHP or SMTP transport set, emails are successful going to the known domain, others going outside fail.

The store is running on our in-house windows server, IIS.
This is starting to look like an issue on the server side.

I'm just wondering if anyone experienced something like this.
I'm running 1.3.8a.

[DrByte]

This is starting to look like an issue on the server side.

Agreed.