Exchange 2003 505 relay error

I have installed an exchange server2003 at a clients. It is set up to send and receive mail directly to the server using DNS.
I have created an MX record on hosting server that points to our static IP address.

I can send mail but cannot receive. The following error is returned when mail is sent to our domain:

This message was created automatically by mail delivery software.

A message that you sent could not be delivered to one or more of its
recipients. This is a permanent error. The following address(es) failed:

  it@domain.com
    SMTP error from remote mail server after RCPT TO:<it@domain.com>:
    host domain.com.s7a1.psmtp.com [64.18.6.14]:
    550-exprod7mx170.postini.com (psmtp.com) [64.18.2.xxx] is currently not
    550 permitted to relay through this server.

LVL 1
Moron6969Asked:
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Alan HardistyConnect With a Mentor Co-OwnerCommented:
Sounds like your MX records are still cached around the world or you have not setup your MX records properly as they are still pointing to Postini which is a 3rd party mail filtering service.
Check your MX records and make sure they are setup properly:
http://www.mxtoolbox.com/ 
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Mike ThomasConsultantCommented:
Have you actually configured the recipient policy on the exchange server to accept email for your  email domain?
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Moron6969Author Commented:
I have added  @domain.com as the default smtp in the default recipient policy (only have one). Is this what you are refering to?
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Moron6969Author Commented:
Thats it, need to wait for propagation.
Thats a handy tool, thanks!
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