Couple of suggestions:

1. Since you do need authentication in order to send messages to the downstream server, remove the smart host. Instead, add ALLDOMAINS in the local host file. Here are the steps:
   • Click Manage Local Host File under Server Configuration
   • Add a new domain as ALLDOMAIN referring to the IP address of your downstream server
   • The benefit of using ALLDOMAIN vs smart host is that SMTP communication will get logged in SmtpOutboundConversation.log and it will be easier to troubleshoot
   • Note that messages already stuck in the queue will still try to go through the settings in the smart host.
2. Use EmailSender to manually send an email to your download stream server and look at the SMTP log to see why is it not getting delivered.