I was working with an Active Directory email enabled group in SharePoint 2010 that was not sending emails. After consulting with the Systems Administrator in charge of Active Directory we were able to verify that the configuration of the group was exactly the same as 6 other email groups that were functioning properly.
I noticed that the display name was not showing in SharePoint and did a search for the group in question. At this point I noticed that there was an existing group with the same name residing on a different domain. After some convincing the System Administrator recreated the group with a different name and the issue was resolved.
Apparently even though the ID’s are different if the display name is not unique SharePoint 2010 will not allow the group to be used for email. The test email that the System Administrator sent through Outlook worked without issue but SharePoint 2010 simply would not accept it as email enabled until the display name for the group was unique. Hopefully this will save someone a headache in the future.