Since we installed Exchange Server 2003 Service Pack 1 (SP1), I've noticed a fair number of instances of event ID 7010 from the Exchange SMTP service. The event log says that our Exchange server is returning a 504: You must authenticate first message to the sending server. What's causing this problem?
This message appears under certain conditions when another Exchange server connects to your server. Let's say that server A (which is running any version of Exchange earlier than Exchange 2003 SP1) connects to server B, which is running Exchange 2003 SP1. Server A sends the XEXCH50 verb to indicate that it's an Exchange server. This verb tells the receiving server that various Exchange-specific bits of functionality (including 8-bit MIME support and the X-LINK2STATE verb) are available. However, for security reasons, Microsoft made Exchange 2003 reject any XEXCH50 requests that occur before authentication. Because server A hasn't yet authenticated to server B, server B will reject the XEXCH50 verb and log the event you're seeing. If you don't want to see the error any more, enable the use of SMTP authentication for both servers by opening each SMTP virtual server's Properties dialog box, switching to the Access tab, clicking Authentication, and selecting the Integrated Windows Authentication box.