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Block emails to certain domain

I would like to be able to block emails going to a certain domain (*@xyz.com) for all users in a domain so that no one can email to anyone at xyz.com.  All users should still be able to go www.xyz.com website, but should not be allowed to email anyone there.  They are running SBS 2003 R2.  Please advise.  Thanks much.
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ispeed-jeremy
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Could you provide more guidance on the DNS solution please?  I tried adding a new DNS zone and making the mx record point to 127.0.0.1 but that also blocked web traffic as well.  Am I on the correct path, or am I doing something wrong?
If your users need to access web traffic to the xyz.com domain, the DNS solution won't work for you unless you match the xyz.com A and WWW records as well.

If users need to be able to see the xyz.com website but not email @xyz.com domain, I would try the second option to define the @xyz.com as a domain the Exchange Server handles incoming delivery for by following the alternative method.
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ASKER

Thanks much.  Sorry for the delay in awarding these points.