One of my clients still runs Microsoft Exchange 2003 (in a VM) and was recently having difficulties debugging some 'lost mail' issues. I had a look in the BadMail folder and was surprised not to find anything in it!
It seems that when MS released SP1 for MSX 2003 they did away with Badmail and now just trash any mail that once would have been stored there. Their argument is that nobody looked in there and it was a waste of space... Hmmm..
But is is useful for debugging and so if you want it back, a few registry changes will do the job.
See: http://support.microsoft.com/kb/884068
Set under: HKLM\System\CurrentControlSet\Services\SMTPSVC\Queuing (note the spelling: “Queuing“)
Note this key - Queuing - will not preexist and you will have to create it.
Value: MaxBadMailFolderSize
This is a DWORD which defaults to 0 if not set. It is the max size (in KB) that the Badmail folder can grow to before Badmail retension is stopped; thus setting it to 0 turns off the Badmail folder and prevents possible DoS attacks. Messages that would have been sent to Badmail will simply be discarded if the MaxBadMailFolderSize is set to 0. If you set this to -1 (0xFFFFFFFF in hex) it will revert to the pre-SP1 behavior of growing without bound.
Value: BadMailSyncPeriod
This is a DWORD which specifies how often we should check the size of the badmail folder (in minutes). If the BadMailSyncPeriod has not been reached, we won't rescan the directory and discover if Badmail items have been removed manually by the Admin.
Stop and start the SMTP service and you will then start catching Badmail. No need for a reboot.