>>If I send mail directly from Outlook Express though, those emails will successfully be delivered. I am still researching this. I have verified the IUSR_ and IWAM_ write permissions to the mailroot folder and I verified the default smtp Virtual Server settings.<<

I had already opened port 25 in the XP sp2 firewall. Upon further brainstorming I remembered there is another firewall in the router, so I opened port 25 there too, but same 'Relay' problem.

Thanks
G