nate.dixon,
Alright, this is getting us no place fast. There are only two settings you need setup under IP Settings in order to be able to turn set the SMTP System to SMTP without getting that error.
1. A valid DNS IP Address. This means only 1 of the 2 DNS IP Addresses has to be valid and has to be reachable from the phone system network.
2. DNS Search List. This doesn't even have to be a valid DNS Suffix Search List for it to work since it doesn't validate it; there just has to be something there.
Now, those are by no means the only two you need to make everything work properly, but they are the only two that are needed in order to not get the message you are getting and to turn the service on.
So, since you have something in the DNS Suffix Search List then most likely your phone system is not able to get to either of your DNS IP Addresses, or vise versa, for whatever reason OR neither of them are actual DNS Servers.
Go to the SSH Command shell of the phone system and then go to commands then try to PING the DNS Server IP Addresses. If that works you are able to get to them; yah!! If it doesn't then you need to figure out why it can't. I am going to go out on a limb here and assume that you know what the DNS server IP Addresses are so we can assume that is not the issue.
Thanks,
TE