I'm having the same problem at the moment, it was working OK a few weeks ago.
I'm not using the SMTP function, just local server. I've sent an email from the server (using the service providers web-mail program) and it got through OK, but nothing that the forum should automatically send is being sent. So it's at the php end I'm sure.
I've tried doing a search for other posts on this topic but the search function here doesn't seem to be working ATM.