IIS-Default SMTP Server configuration

I am using the default SMTP Server of IIS for sending mails from my application. Though this works perfectly when connected to the internet through my LAN and the GW, it is having problems in resolving the domains when sent through a Dial-up connection. In the latter case, all the mails are stocked in the InetPub/mailroot/Queue directory. They are not getting cleared from that directory. From its behaviour, I think it is the problem with DNS resolving. How do I escape from this? Also, what is a 'smart host' and are there any free SMTP smart hosts that I can make use of.