Just to make sure I have it right the Exchange Server can access the internet and use IE ok? The Terminal Server can't?
Yep, just to reiterate, the only problem i have with the entire network is the terminal server cannot browse the web.
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IPConfiguration on Exchange (SBS2003);
External Facing NIC
DHCP Enabled. . . . . . . . . . . : No
IP Address. . . . . . . . . . . . : 202.61.x.x
Subnet Mask . . . . . . . . . . . : 255.255.255.252
Default Gateway . . . . . . . . . : 202.61.x.x
DNS Servers . . . . . . . . . . . : 192.168.0.2
Primary WINS Server . . . . . . . : 192.168.0.2

Internal Facing NIC
DHCP Enabled. . . . . . . . . . . : No
IP Address. . . . . . . . . . . . : 192.168.0.2
Subnet Mask . . . . . . . . . . . : 255.255.255.0
Default Gateway . . . . . . . . . :
DNS Servers . . . . . . . . . . . : 192.168.0.2
Primary WINS Server . . . . . . . : 192.168.0.2

IPConfiguration on Terminal Server (Std2003)
DHCP Enabled. . . . . . . . . . . : No
IP Address. . . . . . . . . . . . : 192.168.0.3
Subnet Mask . . . . . . . . . . . : 255.255.255.0
Default Gateway . . . . . . . . . : 192.168.0.2
DNS Servers . . . . . . . . . . . : 192.168.0.2

(Above should answer all questions re gateway etc)
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Definitely no Proxy or ISA server running. If i set the terminal server to use the SBS Server as a proxy, when browsing the web all i get is the "mycompany" internal webpage.
Next check if the Terminal Server can ping the Exchange Server.
Yes, this is a definite. Everything seems to be fine and working ok. I can even ping externally from the terminal server and resolve host names via SBS server as you would expect.

It almost seems like it is a browser issue ?? IE has been updated to the latest version and a different browser has been tried as mentioned in my first post.

Thanks for the feedback guys.

CTO