This may be your lucky day, I just fixed the same (or very similar) problem over the weekend, albeit for dialup.
The client has an e-smith domain name of xyz.ca but a dyndns name of xyz.dyndns.org. In the messages log the error/problem is that that the two appear to be combined when attempting to sync (ie: trying for xyz.ca.dyndns.org).
Anyway, here's what I did it get it to work:
Find the /etc/e-smith/events/ip-change/S85update-dns file.
In there is a line:
my $domain = db_get(\%conf, 'DomainName');
which fetches your e-smith's domain name (in our case the xyz.ca)
I commented that out and added the following hardcoded value:
my $domain = "xyz.dyndns.org";
Hope that helps, Aaron