IMAP and POP3 users with outlook 2003 were getting this error when trying to send mail:
Task 'email@example.com Sending' reported error (0x800CCC78) : 'Unable to send the message. Please verify the e-mail address in your account properties. The server responded: 530 5.7.1 Client was not authenticated'
Since they were connecting to exchange 2010 Hub Transport server as their SMTP server, I had to adjust "Authentication" tab of default receive connector for Client Email.
What fixed the problem - unticking "Offer Basic authentication only after starting TLS".
Other possible causes:
In outlook account properties Advanced tab untick "This server requires an encrypted connection (SSL)"