I wish I could get ours to work too ! Same position as you, all set up ok in virtual server  settings and then advanced  list settings. Emailing a doc to public  folder works (via OWA you see browse to and download doc) but nothing in Sharepoint.

We then changed the rights for the service account to be "log on locally" on the exchange  box and we then start to get emails containing an error message

"There was an error processing one or more attachments"

back from the SPS server (not exchange) with the subject of the email  the same as the subject of the original mail sent through to the public folder


....so moving in the right direction

but still no sign of doc from public folder  to list

I presume this is a permissions issue and techies are looking into the Application pool side of things at the moment (does the wss app pool need rights to public folder?)