When I added "noplaintext" as a security option and because MD5 was in the mech list SASL complained about no auth mechanism when it started. MD5 was already in the mech list but never failed because auth never reached it in the past, plain took precedence.
I removed "noplaintext" and removed everything but plain and login in the mech list and all works well again. Thank you to all who offered your expertise. I have a follow up question. Why shouldn't I require TLS to encrypt all sessions for any clients who authenticates to send mail out. Isn't that what following parameter accomplishes ? smtpd_tls_security_level = encrypt The manual says "Encrypt - MUST NOT be applied in case of a publicly-referenced SMTP server." I don't want to require other mail servers to use TLS but looking at the logs tells me many clients are connecting via phones and hotspots. So any passing of plain text passwords over an unencrypted session is not wise. Thanks to those offered upgrade advise. 8.04 should have been upgraded a year ago and had I been here it would have. I installed a few 12.04 LTS systems today to begin testing. I had a peek at a couple web server, backup servers, logging, etc... none of it looks pretty. I have a few more questions but they don't involve this thread and I will read more before I ask. Thanks again, Dave