xampp comes with Mercury Mail Transport which can be used for a local smtp server, but to be honest, i have not had luck getting working.
I have yet to find an smtp server that i can get working with xampp, though I'll admit i haven't tried very hard. I just do all of the email testing remotely.
when working with user registration, I manually go in and verify the email addresses.
you may have luck finding a working local smtp server using google.