Confirming the issue is indeed It turns out the issue is SMTP: "HELO can't be [127.0.0.1]" · Issue #6327 · thunderbird/thunderbird-android · GitHub . They have restricted 127.0.0.1 as the EHLO IP address.
If you need an argument for support, the approach they are taking is not standards compliant. RFC 5321 specifically says:
An SMTP server MAY verify that the domain name argument in the EHLO
command actually corresponds to the IP address of the client.
However, if the verification fails, the server MUST NOT refuse to
accept a message on that basis. Information captured in the
verification attempt is for logging and tracing purposes.
So, it is a bug on their end.