I've used a few different email servers, and I'd not go with Mercury32 simply because you need to force it to work as a service. (Has it changed since I last used it?) Other than that, it's solid. Very nice.
Check out hMailServer
. It's pretty good. Missing some things, but still a good server. I do miss things I used to have in both Mercury32 and in ArgoSoft.
For web mail, check out AfterLogic
They have a free version. I've found it to be very nice and wouldn't hesitate to recommend it.
DO NOT go for ArgoSoft .NET Email Server. The Win32 email server was fantastic and had a lot of good features. The .NET version... major problems. Whatever to you do, DO NOT use it. (You can check to see if they've resolved their issues, but I doubt it. It was a rewrite, and the problems were deal breakers. Do not rely on an initial test either. Problems do not arise for a while, but when they do, they will f**k your server.)
Anyways, I hope that helps some.