Intra site mail delivery problem "Must issue a STARTTLS command first"

We are testing forms based authentication on a second Exchange 2003 server recently added to a mixed 5.5 and 2003 site.  Mailboxes on the FBA server can send and receive to and from internet addresses.  They can also send to other intra and inter-site addresses, but they cannot receive inter or intra-site messages.  Senders from mailboxes on other servers throughout the organization receive an NDR similar to the following:

The recipient could not be processed because it would violate the security policy in force.
<server.domain.com #5.7.0 smtp;530 5.7.0 Must issue a STARTTLS command first>

Any help on resolving this error would be appreciated.