It was happening solidly last night from around 7pm (was out before then so no idea what time it started) until around 10.30 when I closed down. Couldn't send any emails, they all failed with Outlook 2010 error message, the meat of which I quoted. Essentially
Send mail fails: server reports an internal error. [can't recall the words here though unimportant] ... The server responded: 554 smtpoutput.karoo.kcom.com.
Sometimes the last bit was
The server responded: [then a dozen or more square box characters, I assume representing non-displayable characters]
When I booted up this morning it was all ok. Clearly something seems to have been up with the smtp servers yesterday evening.