Answer
This is due to a problem with the way that Eudora implements authenticated SMTP. After Eudora initiates the authentication attempt by sending an AUTH command to the SMTP server, it correctly responds with the correct BASE 64 encoded response, Eudora then goes on to issue an RSET command which causes the authentication attempt to fail. The RSET command should never be issued within the SMTP authentication phase. RFC 2554 indicates how an authenticated SMTP transaction should take place:
A server challenge, otherwise known as a ready response, is a 334 reply with the text part containing a BASE64 encoded string. The client answer consists of a line containing a BASE64 encoded string.
Clearly the RSET command does not fall within this statement.
See Also:
Keywords:AUTH, Eudora, SMTP, RFC2554