In the options for setting up the SMTP server hosted in IIS, there exists an option to enable TLS on outbound connections which I want. However I also want it to be able to fallback to clear text in the event that the mail server it is talking to is not TLS enabled.
Will IIS6's SMTP server do that? Or will I need to setup two SMTP servers, one TLS enabled for outbound connections, and one not?
There is no way to create an opportunistic SMTP server in IIS. You'll need to create two virtual SMTP servers (one with TLS required, and one without) and route mail accordingly.
http://www.phreek.org/index.php/prkblog/comments/enable_tls_on_your_iis_60_smtp_virtual_server