For testing with a faked out SMTP server use ndumbster. Phil Haack has a blog post on usage - http://haacked.com/archive/2006/05/30/ATestingMailServerForUnitTestingEmailFunctionality.aspx
As you pointed out email templates are fantastic. Consider creating a template for HTML and plain text. Make sure your HTML email templates use basic HTML as a number of email clients out there are not up to modern day browser standards (eg. Outlook which uses the Word HTML rendering engine).
Log4Net is a good point to start at with logging. You can also use System.Diagnostics for simplistic tracing and debugging which can be written easily out to the event log or a file. I always prefer to have a wrapper for all logging so that logging frameworks can easily be swapped out if you find that you want to swap them out later because of a must have feature. It's also good from the point of testability as you can mock it out easily.
Really it doesn't matter which SMTP server you use as long as you don't get black listed. Make sure you check the SMTP servers IP against a DNSBL so you know if your SMTP host has a bad reputation. I highly recommend checking it using Barracuda Central's IP reputation - http://www.barracudacentral.org/lookups. Also make sure you're SMTP server does support resending when you're recipients use grey listing.
For bounce backs you can setup a POP account for it to send back to, it could be as simple as reading the emails and finding which email account the rejection came from and the subject of the previous email (which should be unique) so that you can send again later or after several bounce backs remove them from the list. To implement reading POP take a look at this thread - http://stackoverflow.com/questions/44383/reading-email-using-pop3-in-c