Delivery Issues with Outlook 2003 (but not with XP)

[EJLsaKounty]

Backend: Exchange Ent. 2003 SP1 / Windows Server 2003 Ent. SP1
Client: Outlook 2003 SP2 and SP1
AD: ttc.lac - The domain does not have web presence.

The Exchange email is being used only for internal emails. Users who need
to email out to the internet are setup to use our ISP using a POP3 account.
Both email accounts are setup on the Outlook profile.

When a user receives an email from the internet, clicks reply or forward,
then adds email addresses from the Global Address List (Exchange - internal
user only), then sends it - the internet reciepients get the email but the
internal Exc addresses bounces back with the error below:

The original message was received at Tue, 14 Mar 2006 13:27:42 -0800 (PST)
from e5003Out.co.la.ca.us [159.83.110.213]

----- The following addresses had permanent fatal errors -----
<[email protected]>
(reason: 550 Host unknown)
<[email protected]>
(reason: 550 Host unknown)
<[email protected]>
(reason: 550 Host unknown)

----- Transcript of session follows -----
550 5.1.2 <[email protected]>,<[email protected]>,<[email protected]>...
Host unknown (Name server: ttc.lac: host not found)

NOTE: this is not a problem with Outlook XP