BT have implemented sender email address verification. This means if you use an alternative email address as your from/reply address, you will not be able to send mail through their gateway.
Below are instructions on how to solve this problem:
BTOpenworld home/residential accounts:
# Set your outgoing SMTP server address to: mail.btopenworld.com (or whatever BT have told you it should be).
# Click on the 'More Settings' button
# Click the 'Outgoing Server' tab
# Tick the box marked 'My outgoing server (SMTP) requires authentication'
# Select the option marked 'Log on Using'
# Enter in your BTOpenworld username/password into the boxes
# Tick the 'Remember Password' box and click 'OK'
BT Business/Broadband Office/Openworld C2B/BtClick/BTConnect accounts:
# You will need to apply to BT for relay authorisation. You must telephone/email the technical support desk and request mail sending authorisation for your domain name. They will check that you are the rightfull owner of the domain and add this to their system, to permit you to send emails (normally within 48hrs) You can email email@example.com or telephone your normal helpdesk for this service.
Full instructions are at: http://btbusiness.custhelp.com