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Settings - SMTP Configuration
note says Enter the SMTP server (machine) name. EXAMPLE: smtp.example.com

However, in the directions:
http://wiki.civicrm.org/confluence/display/CRMDOC/CiviMail+Installation
says insert localhost as the SMTP server

Initially, I thought the term local host was generic and I should follow the modification screen note, but now I'm wondering if "localhost" actual text string should be entered.

Also,

http://forum.civicrm.org/index.php/topic,1422.0.html
I don't know why, but setting up SMTP server in SMTP config to 'localhost' started the mail again and it looks like that it solved this issue. How is it possible that it worked for a long time with a 'mail.website.org' setup... confusing. It is a simple solution, cost a lot of reading on this forum, testing and time.

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Either way - haven't been able to send anything out yet.
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I have verified that SMTP works on my shared server using the test script (remember to change parameters) available here:
http://email.about.com/od/emailprogrammingtips/qt/et073006.htm