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Let me guess, you're users are probably getting the following error when they try to register...
Quote:
You are now registered. However, we were unable to send the activation mail to your email account due to an internal error that had occurred on our server. We are sorry for the inconvenience, please send the webmaster an email notifying him/her of the situation.
When I tried sending mail using php mail() on my Windows system (port 25 is not blocked by my ISP) the mail would not go through. You may have better luck with Linux if sendmail is installed. However, you already have a couple strikes against you.
1. Hotmail does not accept smtp requests (I went around with them for months on this issue)
2. Many ISPs block port 25 (outgoing mail) because of the huge spam issue
3. Unless you're running a NT based version of Windows with IIS, you would need to install a third-party mail server.
I'm not saying it's impossible to do what you want to do, but it won't be easy.
Your best bet is to get a POP3 e-mail account. Then you can configure XOOPS to use SMTP host(s) in the Mail Setup section of Preferences.