jhouse - thanks so much for your posting. I too ran into the exact same scenario where my SMTP mail logic stopped working... My guess is that it was a security update patch from Microsoft that killed it.
Anyway, just to confirm, I had to set the IIS\SMTP settings as you suggested and actually define the SMTPServer and things appear to be working just fine. Well, minus the fact that everything is still getting stuck in the SMTP queue. :-)