AG,

The SMTP Proxy Server requires your Exchange to be up and running. If Exchange goes down, so will Xeams. I have a feeling something is wrong with your Exchange and it is not accepting any emails. 

Try downloading Email Sender from http://xeams.com/email-sender.htm and try sending an email directly to your Exchange. You can do that by putting the IP address of your Exchange server in the SMTP Server field. Let me know what error you get.