SmarterMail queries DNS servers directly, you can change the target DNS servers in the system settings. I'd recommend spinning up a local DNS server that you point SM to, that would give you a lot more control over DNS queries, even things you wouldnt be able to do with the HOSTS file (TXT, MX records)

Matt, yes, I am very well aware of using DNS servers. As I stated, I am troubleshooting a specific problem and as part of that I need to bypass DNS server looks as they are not getting information back from the domain daum.net. So by adding specific lines in the HOSTS file for the MX records, I can get email flowing and then work on the DNS query issue separately. 

In the mean time, SmarterMail is not querying the HOSTS file, as it should be, and is it did in the past.