This is the error:

2011-03-10 15:50:49 login authenticator failed for (WHATEVERHOST) [XXX.XXX.XXX.XXX]: 535 Incorrect authentication data (set_id=user@domain.co.za)

This is what i have in exim:
login:
 driver = plaintext
 public_name = LOGIN
 server_prompts = "Username:: : Password::"
 server_condition = ${if eq{$2}{${lookup mysql{SELECT password_hash FROM popbox WHERE CONCAT(popbox.local_part,'@',popbox.domain_name) = '$1'}{$value}fail}}{1}{0}}
 server_set_id = $1

The above works with plain text passwords

I tried this to get the md5 working, to no avail:

 server_condition = ${if eq{md5($2)}{${lookup mysql{SELECT password_hash FROM popbox WHERE CONCAT(popbox.local_part,'@',popbox.domain_name) = '$1'}{$value}fail}}{1}{0}}