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Optional SMTP setting:
User reports: I was just talking to a BT Helpdesk lady on another matter and I mentioned my (and others) problems associated with Entourage not supporting the SMTP authentication. The answer she gave me works!!
Ensure that all of the check boxes under the Advanced Sending Settings drop down are UNCHECKED - do NOT check SMTP needs authentication!!!
This solution should work for all UK BT customers and hopefully it may help others in the US with a similar problem.