I am unable to telnet to the server on port 25 remotely or setting in front of it and doing a telnet localhost 25 or telnet 127.0.0.1 25.
Are you running any 16-bit processes on the server? There is a known problem with some servers where if they run too many 16-bit processes (as is constantly starting new ones, thousands per day), they will exhibit a wide range of unusual symptoms, including interference with TCP connections.
Also, Len's suggestion that there might be very heavy traffic causing the problem is another possibility -- when too many incoming E-mails are being processed at the same time, IMail can temporarily stop listening on port 25.
-Scott
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