When creating a new account on our Moodle 2 install, when the "create my new account" button is pressed, moodle pauses for around 15 seconds and then the following message appears:

–

Tried to send you an email but failed!

More information about this error
Stack trace:

• line 421 of /lib/setuplib.php: moodle_exception thrown
• line 91 of /auth/email/auth.php: call to print_error()
• line 60 of /login/signup.php: call to auth_plugin_email->user_signup()

Output buffer: SMTP Error: Could not authenticate. ERROR: SMTP Error: Could not authenticate.

–

The server is running two live (production) Moodle installations, the first is 1.9 and emails appear to work fine (I cannot test exactly as creating new manual accounts is disabled), and the second is 2.0. The email settings were duplicated from the 1.9 installation into the 2.0 installation and we still get this error.

The email server is Exchange (2003 I believe) and the 1.9 Moodle install mentioned above and our other production 1.9 install both appear to be working fine, with identical settings.

I'm not ruling out user error but I can't think of anything else to check.