It's one of the installation options for iis. got to Control Panel | Administrative Tools | Internet Information Services and look for Default SMTP Virtual Server.
If you don't see it, you'll have to install it from your XP installation disks. If there's a red x next to it, it's stopped. Right click on it to start it (You should leave it stopped when you're not actually testing).
Your smtp server can be referenced by the domain name "localhost" ( instead of xxx.mydomain.com)
To test if smtp is working properly on your machine:
Copy the following 4 lines into a .txt file:
Change the email addresses to something you can check.
Copy the text file (not a shortcut) to the smtp pickup directory. On my XP machine, it's C:\Inetpub\mailroot\Pickup
Within a few seconds it should disappear from the directory and be mailed to the addresses.