SharePoint Services 3.0 : problems with outgoing alerts to user

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Hi,
We have SBS Standard SP2 with SPS 3.0 installed (side-by-side with SPS 2.0,
as per recommended by Microsoft)).
Not particular problems during installation and everything seems to work
fine...expect that when we attempt to configure alerts/notifications to users
from inside the intranet, we get a message that "this vitual server is not
configured to send email". Where are we supposed to configure that ? I
suppose that somehow SPS 3.0 needs to be told how to link with the SMTP
server?
Thanks for any advice,
Charles
.