Since mass email doesn't work, this is a host setup issue. If you check your website host's FAQs and forums, you should find the proper setup on your site.
Mine is set to PHP Mail, and most of my email IDs require "@domain.com" (i.e.- admin@mydomain.com is the username, as well as the email address). localhost is what I have as host, and I believe this is pretty standard. Double-check also that you have the correct password filled in... it is case-sensitive. Password123 is different than password123.
If you still have problems and can't find the answer, you should contact your host for support.