Ok biggest issue with the smtp asp.net email tutorials is that they don't tell you that you have to first install IIS and then install an smtp servier.  Windows XP or other operating systems that I can think of off the top of my head don't come with these optionis pre-loaded.  I would try that if you still are getting errors. 

You can install IIS and Smtp email server by control panel->Add Remove Windows Componenets-> Install IIS  THEN ->Details from IIS Checkbox and install smtp server. 

Also are you using a local intranet sometimes the server is renamed something that won't allow localhost to work. IE companyServer or something like that.  Give those option a try.

 BC