Hi Bob,
Its because you have enabled smtp settings in site settings instead of user.config and it also encrypts those credentails with the machine key.
So 2 possible solutions.
1. change back to the old machine key and then go into site settings and clear out the smtp user and password, then change the machine key then go back and put the smtp settings back so they get re-encrypted with the new machine key.
2. See the notes I just added at the bottom of the Use a Custom Machine Key article to see how to fix it in the database.
Hope that helps,
Joe