I always get this error. I got default dovecot and postfix installed. Sending mail from Thunderbird and PHP pear mail works fine but if I the mail server in vbulletin 4 it gives me this error in the mail.log.
Part from my config file.
smtpd_sasl_auth_enable = yes
smtpd_sasl_type = dovecot
smtpd_sasl_security_options = noanonymous
smtpd_sasl_path = private/dovecot-auth
smtpd_sasl_authenticated_header = yes
smtpd_sasl_local_domain = $myhostname
broken_sasl_auth_clients = yes
It also throws this error:
Client host rejected: Access denied;
Maybe your sasl_path is incorrect.
You can try to add something like
to your configuration file.