The Web Front End must have SMTP. SharePoint doesn't get the messages via POP
or anything, it reads the messages from the file system where the SMTP service
drops them.

Though technically you could use a remote SMTP server as long as you
configure the dropbox path appropriately to access the remote folder.
SharePoint should also read the Exchange 2007 export format if you
choose to use a custom connector to export the messages from Exchange in
place of an SMTP dropbox.

What does it mean to use a custom connector to export the messages from
exchange.

Think "data translation". I personally find the phrase "connector"
horrible, since it's not really "connecting" anything. It's just
translating data from one format to another.

I was actually referring to a connector - the piece of Exchange that
handles incoming/outgoing email. It is possible to create one for
Exchange that says "for mail  address x, export a copy of the message to
folder y" instead of sending the message to a mailbox or forwarding to
another mail server.

Darn those multiple uses of the same phrase in the tech industry!