I had an application that required sending email through a hub transport server. I created an additional receive connector with all the correct settings to lock it down to just a particular workstation that required to relay email unauthenticated. Whenever I attempted to send email from that host via telnet I received:
Connection to host lost
To fix this, restart the “Microsoft Exchange Transport Service”. This service replaces the Simple Mail Transport Protocol service (Part of IIS SMTP) that Exchange 2003 used. This service only deals with SMTP in Exchange 2007, it is not the transport dumpster.