We upgraded our mail server recently to Microsoft Exchange 2007 and users started experiencing problem sending emails to multiple recipients on same domain.

The error message:
Diagnostic information for administrators:

Generating server: exchange-server.internal.domain.com

[email protected]
external.mail.server.domain.com #500 Firewall Error ##

The error message is pretty clear as to where the problem lies. We do have cisco IOS firewall configured on the router and after further investigation, the problem seems to be the IP Inspect feature in cisco IOS. Exact command:

ip inspect name INBound smtp timeout 3600

or in certain cases

ip inspect name INBound esmtp timeout 3600

Removing above commands from the router configuration fixed the issue and users were able to send emails to the domain in the exchange error message.