I will probably clarify myself a bit. As I have also said in one of my previous comments problem is not only in smtp configuration. I use cyrus-sasl to get subversion server authenticate with active directory (ldap) and in current ubuntu package it is totally broken. I tried to set up virtual debian server with same version of cyrus-sasl2 package and it does work but does not on ubuntu so it's not just documentation/configuration issue but actually some kind of bug in this or related package. I would bet it's most probably just packaging issue but I was not able to find cause for this bug.
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