First, you should test your email send capabilities using the Test Email Sample under Getting Started in the Pentaho Demo Samples. This will clear the trees for you.
Next, the exception you are receiving is a javax.mail.AuthenticationFailedException, which leads me to believe you may have the wrong password for the user name you have specified.
And last, in the email_config.xml, the email@example.com that you reference is setting the default value of the "from" field on the email, not the account by which the mail is being sent. Some SMTP servers do want a valid "from" email address, however. Valid meaning an account that the SMTP server recognizes as one of its own. It's perfectly acceptable to change the value of that parameter.
Pentaho SME & Community Member