User not receiving internal email

We are running SBS2011. We had a situation arise where we needed to delete one of our users and recreate a new account for him. His previous username was john and email was john@ourdomain.com.

We created the new user account and gave him the username of jsmith and the hence primary email address of jsmith@ourdomain.com. We then added john@ourdomain.com as an alias so he would continue to receive any emails sent to the old address. This seems to be working for email originating from outside of the company but does not work for anything sent internally to john@ourdomain.com. Our users are not tech savy at all so I am still a little unclear about exactly how they are addressing the emails but I am assuming they are just using the autocomplete functionality in their Outlook programs when they want to send email to John (ie Outlook just autocompletes to "John Smith" <john@ourdomain.com>)

Here is the bounce message that is generated

Diagnostic information for administrators:

Generating server: SVR-SBS2011.sanmateorcd.local

IMCEAEX-_O=FIRST+20ORGANIZATION_OU=EXCHANGE+20ADMINISTRATIVE+20GROUP+20+28FYDIBOHF23SPDLT+29_CN=RECIPIENTS_CN=John+20Smithaa7@ourdomain.local
#550 5.1.1 RESOLVER.ADR.ExRecipNotFound; not found ##


Also we did go ahead and add john@ourdomain.local as an alias on his account but that did not help.
Any ideas what is happening and how this might be resolved?