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Will PickupDeliveryLocation work when using an outgoing mail server on a different domain than our own?

What happens when the outgoing mail server is not part of the local domain? For example, I work for company xyz.com and our smtp server is mail.xyz.com. We host client sites in a multitennant application. We allow our users to point to their own smtp server using email configurations we store in our database.
The code we use to send emails loads the configuration with the smtp information and the authorization needed to send an email on behalf of our clients through their email system.
Currently we are running into concurrency issue that is causing timeouts for various clients when notifications are being processed. They are currently configured to be sent immediately. I've read that moving to the local pickup directory can solve this issue.
I am concerned if I specify a path like C:\Temp\Mail but use an SMTP connection to a clients mail server is that going to work? Doesn't the email being created and sent from the pickup location need to be on the same domain as the smtp server?
How will the clients SMTP server know .eml file has been generated for their domain and needs to be sent out without having to change our client's environment? If someone can provide any information as to how the SMTP and Specified Pickup Locations work I would greatly appreciate it.

The basic operation of an SMTP server in this sense is to monitor a specific set of folders and perform an action when an event occurs. Where your concern is is in that a file dropped into the pickup location is parsed and sent.
The basic SMTP operation allows any email server to send any email regardless of the domain that the email says it is from. This obviously caused issues with fraudulent emails and has been mitigated originally by Designated Sender and further extended via SPF, DIM, and DMARC.
So what your client would need to do is to have their SMTP setup properly and configured for your email domain(s). On your end it would be recommended to only allow the Designated Senders generate emails, and set up SPF etc for those clients as well
Microsoft has a good article on the SMTP basics How SMTP Works
Google has plenty of lists for SPF, DKIM, and DMARC as well.

C#: Receive incoming mail sent to myaddress#mydomain.com

I have my own (Windows) VServer with my own domain and mx record.
Now I want to build a simple mail listener, which listens to all incoming mail to "*#mydomain.com" and stores it in a database.
I spent probably an hour googling, searching stackoverflow and informing about protocols, but I haven't found anything quite close to what I want to achieve.
What I don't want to do:
Receive mails via IMAP/POP3/Exchange from an existing mailbox server
Send Mails via SMTP
Install any mailbox server software, e.g. Mercury Mail

How can I get the SMTP host name from email address?

I was working on an application which would send emails automatically at specific time intervals to a valid email. Searching through the internet I found that most of the codes use the existing email accounts such as gmail.com to send email by logging in as an SMTP client. But my problem is that I won't be knowing the smtp server name of the users email(since the user is not generally aware of these things though he will be knowing the login/passoword). For example,
someone#gmail.com should give smtp.gmail.com and port number (465)
someone#nextek.net should give mail.nextek.net and port number (?)
someone#screaming.Net smtp.tiscali.co.uk and port number (?)
I got the MX records using the domain name of the email address, but I realized that it actually gives the available incoming SMTP server names.
For example gmail.com would give gmail-smtp-in.l.google.com along with four other server name if I ping using nslookup in command prompt.
Also what is the advantage of sending email by using an existing SMTP supporting email than sending directly by looking up the email server name through dns? Or is it not possible?
Correct me if I am wrong, since I am not much familiar with the protocols.

If you're not familiar with the protocols, it doesn't make sense for you to try to implement the protocol.
Generally, an application like yours doesn't need to worry about the details of the SMTP protocol. You would use an existing SMTP client library for your platform (I'm sure there is one for .NET you can use), and connect to an MTA (your MTA, not the recipient's), give it the email to send, and you're done. The MTA will take care of all the SMTP protocol details of figuring out how to get the email to the recipient.
Sending email is very similar to dropping a letter in the post box on the corner, and letting the post office figure out how to deliver it. You don't need to know which vehicle to put it on, or where the recipient's local post office distribution centre is, or any of those details.
You may choose to set up your own MTA using something like Postfix, or you can send email through your own Gmail account (of course you'll need a Gmail account and password before Gmail will let you do that).

Automatically creating email addresses and receiving emails with C#?

I'm a big fan of the email feature available in Backpack, where it creates a unique email address per backpack page, and any emails sent to that address will be posted to the page.
My question is about how best to go about creating new email addresses automatically, and listening for new emails sent to those addresses. I'd like to do this from a C# service (I'm not using ASP.Net)
Has anyone tried to achieve this or
something similar before?
Are there libraries (preferably
FLOSS) already available which do
this or would assist me?
Is it possible to do this using a cloud-based
email service (and if so, what service?) and a
library for communicating with that
service (OpenPop.Net or similar)?

If your email provider supports setting up wildcard email on your domain, then you can do this with a single email account.
For example, Google Apps for Domains allows setting *#example.com to be delivered to myaccount#example.com. When someone emails sales#example.com or contact#example.com it will all be delivered to myaccount#example.com.
Then it's a process of getting all the emails. You then look at the to header in the email, match that with the name stored in your application for that user, and then process however you wish.
Be aware that you will get spam and other incorrectly addressed emails when you use this method. You will have to deal with these yourself (eg by discarding incorrectly mail that isn't addressed to a valid account).

I haven't played around much with incoming mails, but from the top level here is what you should do.
Create email addresses for the users based on any logic and save it in the DB.
Setup a mail server with your domain name and set one email account as a "catch-all" mail account. Any mail sent to your domain would then be caught under that mail account, in case the email address is not found.
Create a windows service, that would read mails from that "Catch-All" account. There are several libraries available to read mails using POP3 or IMAP.
Read the incoming mails to check the email address it was sent to, compare it with the values stored in the DB and process accordingly.
Check this question. it might help you with reading incoming mails.

The objective isn't to create email addresses, that doesn't really happen. What you do is accept email addresses at your system, what you accept is up to you. You could set up a mail server to receive any email sent to your domain, you could then parse the email To field and extract the 'name' portion. If it matches something you are listening for then you action it accordingly.
I don't think you'll find a library for this specific activity as it's rather insular. There are plenty of ways of receiving emails directly or indirectly and processing them in C# but I won't cover that as mail handling in .Net is well documented.

Sending an email in C#

Is it possible to send an email in C# console, without needing and SMTP server?
Edit:
Why do I need another SMTP server? Can not I use my localhost machine as a server..?
Edit:
I just need to send an email from with my domain name, for example abc#mydomain.com
Is that possible? what do I need to do this in my C# program... I do not care about receiving emails, I just care about sending them....
Thanks

You don't have to depend on a local SMTP server if you don't have one. However, you will have to connect to a SMTP server anyway. Here is why.
You must achieve the following steps:
Determine what is the mail exchange servers of a given domain.
Connect to that mail exchange server and deliver your mail.
Those steps are normally done by your local SMTP server. Another advantage of your local SMTP server is that it will handle its queue and continue to try to deliver your email if it fail.
How to determine the MX records of a give domain.
I suggest you to have a look at this answer. Basically, you have to do a query on a DNS server to get the list of MX records of the domain name of the email address you want to send an email to.
How to connect to a mail exchange server
Well the answer will disappoint you. Exactly like you connect to your local SMTP server. Using the TcpClient, you connect to one of the mail exchange server you got at the previous step on port 25 and start the delivering process using the SMTP protocol.
The trick here is that you must handle multiple MX servers. They are usually listed with a preference. If the first one is unreachable, you try the next one and so on...
That is something your SMTP server can handle for you too.
If you really want to build that logic yourself, please have a look at the DirectSend method of the SmtpClient class of this open source project I'm involved in.

As #TomTom points out, the entire mail infrastructure depends on SMTP. What you can do is to skip the output (relaying) SMTP server and send the message directly to the receiving SMTP server.
To do that you need to create some kind of queuing mechanism (there is no guarantee that the receiving SMTP server can serve you when you try to connect) and that you can look it up.
MX records are entries stored in DNS servers and are used to find SMTP servers. You can find a article here with a MX lookup example: http://www.codeproject.com/KB/IP/dnslookupdotnet.aspx
However, I DO recommend that you install a local SMTP server and let it take care of the above mentioned issues.

Yes, Basically figure out where to sent the email and send it. i.e. a DNS MX lookup for the domain to find out the SMTP server.
Every email needs an SMTP server on the receiving side.

You can use gmail or yahoo SMTP server, if you don't want to install your own.
Before sending mail you first need to authenticate, otherwise sending mail is not going to possible.

You need access to some kind of email server to send your email, and your email will most likely pass through one or more SMTP servers on it's way to the recipient. However, the email server you connect to might let you send the email without using SMTP. For example, Exchange might let you use MAPI or CDO to send emails. Though I think that CDO is not officially supported by .Net and simple MAPI is deprecated in Windows and should not be used. You might be able to use Exchange Web Services as described here: Introducing the Exchange Web Services Managed API 1.0
If you have another email server than Microsoft Exchange, that server might have some kind of API you can use.

Something I do often is to create gmail account and send through that account.
You just need your SmtpClient to connect to the host smtp.gmail.com on port 587 with the username, password, and enableSSL property set to true.