Read the documentation first: http://msdn.microsoft.com/en-us/library/ms159155(v=sql.105).aspx
There you will see a sentence: The Report Server service account must have permission on the SMTP server to send mail.
Although there are settings in the configuration, that looks like letting you specify username and password, but it is not used
As you can see here, it was a feature request at Microsoft also: https://connect.microsoft.com/SQLServer/feedback/details/332979/using-external-authenticated-smtp-server-for-email-delivery-reporting-services
So, if you can't configure your mail server to fit this specification, due to higher priorities, you will have to use an smtp relay. This is one option (source is the same link as above):
Quote:Here's a really easy workaround: install IIS SMTP server and configure your SMTP server that requires authentication as a SmartHost in the server properties (not domain properties). The local IIS SMTP server will then quite happily forward all your email onto the remote SMTP server that requires authentication. Job done.