Look at grasshopper's response right before yours. That should fix your problem.

drobinson-968235 why aren't you using Active Directory to control your security instead of logging everyone in as the same user. If you use AD you can control what reports...

I just had this same issue and figured out what was wrong so hopefully this can help you.

Go to your Solution Explorer and right click on the solution...

I can't find the xp_smpt_sendmail proc.  Any ideas why?

Error message in Query Analyzer:  Could not find stored procedure 'master.xp_smtp_sendmail'.