I've figured out my problem, which I posted above. Turns out it is self inflicted

Originaly was running 6.01 and, being desperate, followed instructions here:
http://no.longer.valid/phpwiki/index.php/OutboundSMTPAuthfor an different solution to SMTP Authentication, called OutboundSMTPAuth. It didn't work, so I migrated to a new server running 6.5RC2
But... a custom template from OutboundSMTPAuth came along with my restore, which was overriding the default template. So if you have the problems I described above, it may be that you have and need to delete the following file:
/etc/e-smith/templates-custom/var/qmail/control/smtproutes/20SMTPSmartHost
Then update:
/sbin/e-smith/signal-event email-update
Working as advertised now!