It may be that your Magento Connect is not fully compatible with the current, since 1.6.x is pretty old version. You can do it other, unofficial way.
1. Go to the http://freegento.com/ddl-magento-extension.php
2. Paste there your link: http://connect20.magentocommerce.com/community/SMTP_Magento and click on Submit
3. Download package
4. Go to your Magento Connect, and in section Direct package file upload, upload downloaded package and click on button Upload.
And if that doesn't work too, you can manually install the extension by extracting it into your Magento directory. In the most cases it would work, but sometimes it happens that files in extensions are not mapped 1:1 with directories where they should be. In that case, you'll need some developer's experience, but that's it.
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