Email plugin throwing SMTP error code 554

[eluser]taewoo[/eluser]
HI everyone.

I'm a newbie to CI, so please bear with me.
I managed to integrate FreakAuth into my CI installation (by the way, it's DOPE). I am testing the user registration part of it and I'm using SMTP server I setup on dreamhost. (I tested the account to make sure it can send and receive just fine via outlook)

I do a debug message and I am getting this error:

Code:

220 spunkymail-a11.g.dreamhost.com ESMTP

hello: 250-spunkymail-a11.g.dreamhost.com
250-PIPELINING
250-SIZE 40960000
250-ETRN
250-STARTTLS
250-AUTH PLAIN LOGIN
250-AUTH=PLAIN LOGIN
250 8BITMIME

from: 250 Ok

to: 554 : Recipient address rejected: Access denied

The following SMTP error was encountered: 554 : Recipient address rejected: Access denied

data: 554 Error: no valid recipients

The following SMTP error was encountered: 554 Error: no valid recipients
221 Error: I can break rules, too. Goodbye.
The following SMTP error was encountered: 221 Error: I can break rules, too. Goodbye.
Unable to send email using PHP SMTP. Your server might not be configured to send mail using this method.

User-Agent: CodeIgniter
Date: Fri, 25 Jan 2008 21:12:22 -0800
From: "Redmol.com Redmol Administrator"
Return-Path:
To: [email protected]
Subject: [Redmol.com] Account activation info
Reply-To: "[email protected]"
X-Sender: [email protected]
X-Mailer: CodeIgniter
X-Priority: 3 (Normal)
Message-ID: <[email protected]>
Mime-Version: 1.0

What does this mean and how do I remedy the situation?

PS: I made sure port 25 is open and working (via outlook)