I am trying to test some email sending from my localhost. I'd like to use an external SMTP server for this matter. I am using Windows 7/XAMPP. I tried configuring sendmail.ini with no luck. Where/how can I tell Magento to use specific settings for sending emails?
You can set the SMTP host and port in System > Configuration > Advanced > System > Mail Sending Settings.
For sending emails from an external SMTP server, however, I would recommend the free extension SMTP Pro.
Ashley (the extension creator) describes what the advantages are:
This Magento extension is created for expert users who need full control of the Magento SMTP server settings. You can control authentication, security and specify your own host and port. The extension supports self-testing and Magento newsletters. This extension now also has the ability to easily configure and send from Gmail or Google Apps email addresses.
We have some other ways to set up smtp for magento, the default settings only accept the basic set up. You can check magento set up tutorial here Magento SMTP Email Setup