What other servers are in question here?
NTLM authentication does cause issues on many platforms and applications so we'll need to know what other application or services are in connection with this failure. Technically you've disabled NTLM so it shouldn't matter but still need to know what other applications that you're using requires NTLM.
Or your network infrastructure, is the SMTP behind a firewall or going through another server using NTLM?
The following is just for my own reference.
When you configure Microsoft Operations Manager (MOM) 2005 to send Simple Mail Transfer Protocol (SMTP) e-mail notification responses, the e-mail notification is not sent. You receive the following error message in the Application log on the MOM 2005 server:
Failed to send SMTP message. The message could not be sent to the SMTP server. The transport error code was 0x80040217. The server response was not available hr=-2147220975
By default, MOM 2005 uses NTLM to authenticate the SMTP server that is listed in the E-mail Server global settings in the MOM 2005 Administrator console before MOM 2005 sends the e-mail notification response. If the SMTP server does not support NTLM authentication or is configured to accept anonymous authentication, you receive the error message that is mentioned in the "Symptoms" section.
Warning If you use Registry Editor incorrectly, you may cause serious problems that may require you to reinstall your operating system. Microsoft cannot guarantee that you can solve problems that result from using Registry Editor incorrectly. Use Registry Editor at your own risk.
To work around this problem, you must create a registry key to enable MOM 2005 to send e-mail response notifications without using NTLM authentication. To do this, follow these steps:1. Click Start, click Run, type regedit, and then click OK.
2. Locate and then right-click the following registry subkey:
HKEY_LOCAL_MACHINE\Software\Mission Critical Software\OnePoint\Configurations\<Configuration group name>\Operations\Consolidator
Note The configuration group name is the name that you created during the initial setup of the MOM configuration group. You may have more than one configuration group. In that case, you must change the registry subkey for each configuration group.
3. Click New, click DWORD value, type SendSmtpAnonymous for the DWORD value name, and then press ENTER.
4. Double-click SendSmtpAnonymous. In the Edit DWORD Value dialog box, type 1 in the Value data: field, and then click OK.
5. Quit Registry Editor.
This behavior is by design.