Email Settings didn't go as expected

Perhaps I misunderstood how these settings translate. The server for this client has a 500 emails/hour restriction. The total audience is 722. So we set the Email Settings to be very conservative for the first mailing at 200 emails, every 10 minutes with 1 second between. I thought so anyway.

Once the Send button was clicked, it began sending and didn't stop at 200. It continued until all 722 were sent. However, at email #500 it began returning "Mail delivery deferred: returning message to sender" in the subject and "Domain xyz.com has exceeded the max emails per hour (500/500 (100%)) allowed. Message will be reattempted later. There were 125 of these that came back, so I don't know if the other 97 or so after that were sent or not and I can't seem to figure out how to make sure the others were successful after the next hour.

Where did I go wrong.
Did I totally misunderstand the settings? Or did I forget to do something else?

Again, my settings were:
200
10
1

Thanks,
TroyD