When you're setting up your DotNetNuke website, the settings that your site should use are different than the settings DNN should use.

In DNN, you should use the following settings:

Host EMail Address:  Email@YourDomain.com  (This is an email address you have created through the control panel).
SMTP Server:  127.0.0.1
Authentication Settings:  None / Anonymous
All usernames and passwords should be blank

In order for this to work, the Host EMail address must be an email address that belongs to your domain and it must be created through the control panel.  Additionally, the email address that it is sending to must be valid.  If yoru emails are not set up like this, you may get messages saying that relaying has been denied.  

If you are currently still using your temporary URL and have not brought  your site live yet, then you will not be able to receive any of the emails generated by DNN until you bring your site live.