From the box you are running SugarCRM, can you ping the smtp serevr using the name you are entering?
From the same box, if you run "telnet smtphost 25" do you get a response?
If you do, then you are connecting to the smtp gateway. The next steps are to test the smtp responses:
"helo"
"mail from:validemailaddress.com"
rcpt to:testemailaddress.com"
"data"
"type some junk"
"."
quit
This shoudl simulate an smtp conversation and send an email from validemailaddress to testemailaddress. From the error message, I would guess you are not even getting to the host though.