I have set up a Query Based Distribution Group on the OU = Teaching Staff.

When i preview the results under the Query Based Distribution Group properties it displays all the members which is everybody that i want.

But when sending an email to allteachingstaff@domain it returns to me as an NDR:
Your message did not reach some or all of the intended recipients.
The following recipient(s) could not be reached:

All Teaching Staff on 17/11/2008 13:55
The e-mail account does not exist at the organization this message was sent to. Check the e-mail address, or contact the recipient directly to find out the correct address.
<eehs.surrey.sch.uk #5.1.1>

So i then went to message tracking and it seems to be getting as far as:

SMTP: Message Categorized and Queued for Routing.
SMTP: Non-Delivered Report (NDR) Generated.

Its almost creating an NDR because it doesn't have an Email Account in the store but i thought a Query Based Distribution Group doesn't need one.