can this be helpful :
Problem: When customer selects scan to email - full color - jpeg format , gets error code 016-764 every time and scan fails. B&W and other formats work fine.Cause: Edocs RAP points to a Mail Server error but the customer mail server is OK. Possible software error.
Under the Image compression button you can select low, normal or high compression. Default is Normal. When Low is selected, scan works every time with no errors
also if not solved, have you tried upgrading the 7120 firmware? 71.21.33 is the latest one, can be obtained by calling xerox. lots of smtp issues were resolved