This guide assumes you have Microsoft Exchange 6 successfully installed along with Outlook Express. It will take you through the steps necessary to configure Outlook to work using Exchange as it's SMTP and POP3 server through a domain or direct IP.
If you are using a different version of Exchange, Windows or Outlook some steps may be different but you may still find the information useful.
Steps:
Click Start > Run > Type "services.msc" > Press Enter
Look for the service named "Microsoft Exchange POP3" and right click it then click properties.
Set the "Startup type" to "Automatic" and click OK.

Then right click the same service and click Start.

Next open up Exchange System Manager by going Start > All Programs > Microsoft Exchange > System Manager
Now expand the folders called Servers > *Your Computer Name* > Protocols > POP3
Right click on "Default POP3 Virtual Server" and click Start

Next expand the folders Recipients > Recipient Properties and in the right hand side box right click "Default Policy" and click Properties.

Now click the "E-Mail Addresses (Policy)" tab and click New

Select "SMTP Address" and click OK

In the "Address:" field type an "@" sign followed by your domain name or external IP address, e.g. "@avapa.co.uk" or "@12.345.678.90", then click OK.

Next make sure the checkbox next to your new SMTP policy has been checked and click OK.

Then click Yes.

Next, expand the folders called Servers > *Your Computer Name* > Protocols > SMTP and right click "Default SMTP Virtual Server" and click "Properties".

Go to the "Access" tab and click "Relay"

Now check "Only the list below" and click OK.

Next right click the folder called "Connectors" and click New > SMTP Connector...

In the "Name:" field type "SMTP-OUT". Check the option that says "Use DNS to route to each address space on this connector" and click "Add..."

Now select your computer and click OK

Now click on the "Address Space" tab and click "Add..."

Select SMTP and click OK

In the "E-mail domain:" field type an asterisk ("*") and in the cost domain type "1" and click OK.

Click OK.

Now open the Active Directory Users and Computers from the same place in the start menu as the Exchange System Manager
Expand the folder representing your domain and right click Users > Click New > User

Fill in the user's details with their information and give them a suitable user logon name then click Next.

Enter a password for them and click Next.

Make sure "Create an Exchange Mailbox" is ticked and click next.

Check the information in the Summary screen and click Finish.

Now right click your newly created user in the User's list in Active Directory and click Properties

Go to the "E-mail Addresses" tab and click the SMTP policy we created earlier and click "Set As Primary".

This will now become bold to confirm it is the primary policy, then click OK.

Now open up Outlook Express and click Tolls > Accounts

Click Add > Mail...

Type the name of the User we created earlier and click next

Type the email address of the user we created earlier (this is formed by their username followed by an @ sign and the domain name) then click next

Type the domain name in the incoming and outgoing mail fields and click next

Type the user's username and password we entered while creating the user earlier in the Active Directory. Make sure SPA is unchecked and click next.

Click finish.

Next click Tools > Accounts > Double click your new account > Servers > Tick "Outgoing mail server requires authentication"
Click OK.

If you setup your Exchange and Outlook with a direct IP address (i.e. pete@12.345.678.90) this will be all setup and ready to go. If you set it up using a domain (i.e. pete@avapa.co.uk) you will need to set the MX DNS records on your domain to point to your server and make your router forward the appropriate ports.
If, when trying to send an email using the SMTP settings, you get a "5.7.1 Unable to relay" error, you need to go back to:
Exchange System Manager > Expand Servers > *Computer Name* > Protocols > SMTP > Right click Default SMTP Virtual Server > Properties
Click the Access tab
Click the Relay button
Change the relay settings to let the application you want to integrate with your exchange server use it as a relay server. This can be done by specifying it's fixed IP address by clicking Add and filling in the relevant settings, or by letting anybody with a correct username and password use the relay by selecting "All except the list below" and checking "Allow all computers which successfully...".
To follow a tutorial on how to change MX and A DNS records click the link below: