IMS queues when Outlook client sends email but sends fine with OWA???

Recently, this problem occurred. I have 2 servers, a w2k and a nt4 both running exchange 5.5 sp4. I have one IMS that is in the w2k box. All outlook clients (version 2000) cannot send out email within the local lan. The email is received by the IMS and sits in the outbound queue awaiting delievery. However, when those users logon via thru OWA, messages are sent just fine. Also, i have outlook installed locally on the w2k box and when i open up my mailbox or any other mailbox, it also sends fine

here's what i have done up to this point
1. reapplied SP for both OS and SP for both Exchange. No luck
2. reinstalled the IMS on the w2k
3. installed/moved the IMS to the nt4. No luck
4. Enable message tracking in the IMS. I see a 1011 (smtp transferred) when email are sent from OWA but 1010 (smtp queued outbound) when sent from a outlook LAN client
5. telnet remotely to my exchange port 25 in the w2k side and sent out an email using the HELO transaction. Successful
6. Recreated the outlook profile on a client machine successfully but when trying to send, same thing happens

The IMS queue will show the originator and the destination of those emails. When you look at the details of the email, it will say "host unreachable." The problem almost seems like it is a permission issue. Exchange doesnt seem to want to send out those message because it doesnt know/recognize who the sends are.

Also, no replication problem between the server. The w2k box holds all roles in the AD. The NT4 is a backup

I would really appreciate it if anyone can shed some light on this...Its driving me mad

 

might be better to have a look in the
microsoft.public.exchange.connectivity NG

I am am assuming that there is sufficient disk space on both computers
and the GWART is not corrupt.Are WINS and DNS server functioning alright?