[Exim] AUTH PROBLEMS

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Hello,
"Sorry if this post comes up twice I posted using the wrong account the first time"
I have used sendmail for a while now and thought I would give Exim a go so I am a complete newbie at this mailserver,

I have auth login working on my test exim 4.05 mailserver but I cant send through it, outlook express gives the error below

An unknown error has occurred. Account: 'LAN', Server: '192.168.0.1', Protocol: SMTP, Server Response: '334 VXNlciBOYW1l', Port: 25, Secure(SSL): No, Server Error: 334, Error Number: 0x80004005

what have I forgotten to do ?

TIA
Nick
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