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Public Folder Replication from Exchange 2003 => 2007. Receiving server shows eventid 1035

I have a new exchange 2007 box that I'm trying to convert my existing exchange 2003 organization to. 2007 is installed and working, however as I began to replicate the public folders, the following happens:

2003 server successfully sends the replication messages.
They then get stuck in the outgoing connector queue with the message: "The connection was dropped by the remote host."

The outgoing SMTP logs show:
16:46:02 x.x.x.x EHLO - 250
16:46:02 x.x.x.x x-exps - 0
16:46:02 x.x.x.x QUIT - 240

On the receiving server I have an event log error 1035 from SmtpReceive stating the following:
Inbound authentication failed with error LogonDenied for Receive connector Internal Exchange. The authentication mechanism is Gssapi. The source IP address of the client who tried to authenticate to Microsoft Exchange is [IP of 2003 Server].

I have an internal only receive connector setup that only allows connections from the other exchange server. I have the the authentication set to TLS \ Exchange Authentication \ Integrated Windows Authentication. The permission groups are Exchange Servers \ Legacy exchange servers.

Extra info: I'm running internal DNS for all domain functions with forwarding for anything outside. My internal domain is bob.local and my e-mail domain is bob.com (examples).
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red0610
Asked:
red0610
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SembeeCommented:
Did you change any of the default connectors? If you did - why? The default setup will allow Exchange servers to replicate content between themselves, nothing else needs to be done. The only thing you have to do is add a send connector and possibly enable anonymous to allow email to be received from the internet.

Have you done anything with SSL certificates? The use of TLS is probably part of the cause, I would suggest removing that.

Simon.
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red0610Author Commented:
This was also not working with the default connectors. Using a dedicated one for internal connections was recommended from googling the problem. If you add an internal connection tls is enabled by default as an available option. I have already tried removing it as well, it did nothing.
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red0610Author Commented:
Nevermind. Took a 5 hour support call to Microsoft. Due to a restrictive group policy setting for "Access this computer from the network" the exchange servers couldn't connect to each other.  
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