>1.) point the customers doamin to my mail server (MX and host)

In his domain's zone file,

@       IN      MX      5 KingdomOfKynoch.com

>2.) set the hosts file on the mail server to reflect the new doamin

<client MTA ip-address>          clientdomain.com

>3.) allow the customer to connect on any ip and issue the ETRN command.

wait, what's this "any ip" thing?  The client ip has to be in the subnets 
you have setup in Imail smtp security tab  "allow relay for addresses" field.

That "should" work. vbg

Len

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