According to Microsoft, this error may be recorded when the Fax service on a Windows 2008 Server is configured to route the faxes to an email address. The full description of the problem and information about the hotfix available can be found on ME973640
Symptom: Faxes are not submitted to the sharepoint folder.
Please try the following steps:
1. Register the following dll: (C:\Program Files\Microsoft Windows Small Business Server\Client Experience\FaxRouteExt\sbssharepoint.dll) with the "regsvr32 sbssharepoint.dll" command
2. Give the "Everyone" group Full access to: program files\Microsoft Small Business Server\Support\stsprovisionlog.txt
3. Check the security permissions on the "\Program Files\Microsoft Windows Small Business Server\Client Experience\stswrapper.dll" file.
Permissions should be as follows:
Domain Admins Full Control
Domain Power Users Read & Execute, Read
Network Service Read & Execute, Read
SBS SP Admins Read & Execute, Read
System Full Control
Note: Also, check the identity for DefaultAppPool in IIS. To do this, open IIS Manager, expand Application Pools, right-click DefaultAppPool, click Properties, and then click the Identity tab. By default, this application pool uses the Network Service predefined identity. If you are using SQL Enterprise Manager to manage the SharePoint MSDE or the SharePoint databases, also make sure that the Network Service account has login permissions for the databases.
Go To Domain Security policy -> Computer Configuration -> Windows Settings -> Account Policies/Password Policy -> Minimum password length
Please change the domain password policy to reduce the minimum password length from 14 to 12. It has been observed that in some cases the fax routing extension for SharePoint will not function if the password length is greater than 13.
In my case, port 25 was blocked by the firewall. I added fxssvc.exe to the exception list for port 25 and the problem was solved.