I had this issue last weekend.
The issue was that I was moving away from Vista's Windows Mail to Windows 7 and using Windows Live Mail.
My email did not seem to have any problems while using Windows Mail. Once on Windows Live Mail, I was able to receive incoming email, but not send out.
After reviewing the error and the POP3 configuration settings, I discovered that the Outgoing Server (SMTP) was required to send email.
Once this option was checked, it worked like a charm.
One more thing, don't forget to check your Outgoing Server SMTP port, the server may have a different one from the default (25). Most of the time if they are not using 25, it is changed to 587.
Hope this works.
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