I got the correct answer from DLINK's customer support. The key is to have the correct SMTP server (or the actual IP address) and also have a primary and secondary DNS setup.
To configure the DNS, go to SETUP -> Network. You must have a primary and secondary DNS so that the camera can find the correct IP address for the SMTP server. If you don't know the DNS gateways to use for your network, they had me use generic ones 4.2.2.2 and 4.2.2.3.
You can use an IP lookup service to find out your service provider's smtp gateway IP address. However, if you have the DNS gateway IP addresses configured, this should solve your email problems.
Sadly there has been no documentation on this issue in the DLINK forum until now. I just spent an hour on the phone to get it.
hope this helps