We use this feature with our third party suppliers & haven't had any problems, as you say as long as the domain is attached to a location you have set up.
Does the incoming email have an address containing something which is in the Ignored Senders section of the email options (just under the Accepted Domains / Location Domains box)? Or maybe even something in one of the Regular Expression filters?
Thanks Billy. Turns out there's a checkbox in the email settings labeled "Allow Auto-Submitted Email". It was the last setting on the screen and somehow I scanned right over it numerous times. Checking that box allowed the emails from the outside vendor.