I have the current setting to be: Relay for Local Hosts only.
That's also referred to as "Relay for your users and spammers only." You are an open relay.
IMail's SMTP Security options have a number of relaying choices. Of them, only 2 can be used safely (the rest cause you to be an open relay). The two safe options are "Relay for Addresses" and "No Mail Relay".
If you use IMail's "Relay for addresses", you would enter a list of "safe" IP addresses that your users may come from; anyone not coming from those safe IPs would need to use SMTP AUTH. If you use "No mail relay", everyone must use SMTP AUTH to relay mail. Note that relay settings apply only to outgoing E-mail, so no matter what your settings are, your users will still be able to get mail.
So to reiterate: "Relay for Addresses" or "No Mail Relay" are safe; everything else will get you listed in a number of spam databases.
Before working on the Outlook error, you'll need to deal with this.
-Scott
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