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Most likely there is something amiss with the settings you've entered for the mail server (and username & password) or possibly a size restriction on the SMTP server you're using.
Use the test under Preferences > Sharing books via email > Test to prove that it will send as expected.
You could sign up for a gmail or hotmail account solely for the purpose of sending books to your Kindle and sidestep all the configuration options. That might be slightly slower than using your ISP's mailservers but it has the advantage of working anywhere that gmail/hotmail works.
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