I think I had a similar problem with our own mailserver. You may need to specify an on-site email address for the $msg->from() field. For example, if your site were yoursite.com and your SMTP server is exchange.yoursite.com , you might need to give it an valid address like yourname@yoursite.com in order for Exchange to let it pass. I'm guessing this is one of Exchange's security settings (believe it or not, I think MS actually thought about this issue!)

- andre