The code you are looking for is almost certainly this (in include/class.email.php):
$alert=sprintf("Unable to email via %s:%d \n\n%s",$smtp,$smtp,$smtp);
Sys:(LOG_ALERT,'SMTP Error',$alert,false);
Perhaps changing it to
Sys:(LOG_ALERT,'SMTP Error',$alert . "\n " . $to,false);
may be more helpful? This SHOULD print out the email address which was supposed to receive the email.
I am not sure that it is possible to return the actual SMTP error - I don't even know for sure that such an error would be generated...