With xp_sendmail of SQL 2000 you don't need SMTP on the box, you need a MAPI Profile. see: How to configure a mail profile (Windows). In the MAPI profile used by SQL you can specify the prefered delivery options, eg. Exchange server conectivity, or the SMTP server used by the rest of your organization.
From KB 263556 INF: How to Configure SQL Mail:
SQL Server 2000 SQL Mail establishes
an extended MAPI connection with a
mail host, while SQLAgentMail
establishes a separate extended MAPI
connection. Both SQL Mail and
SQLAgentMail can connect with
Microsoft Exchange Server, or a Post
Office Protocol 3 (POP3) server.
NOTE: Due to the limitation of only
providing extended MAPI support, SQL
Server 2000 requires a Microsoft
Outlook 2000 client (or later
version).
Before you configure SQL Mail, you should test
the mail profile used by the mail
client to verify that you can use it
to send and receive e-mail to and from
the mail server.