I know Exchange has an option to set distribution groups to only
be available for use by "authenticated or trusted senders" (this
prevents email/spam from the internet from being sent to internal distro
groups). We ran into this problem, because SharePoint does not
"authenticate" to the Exchange server, it is not, by default,
trusted/authenticated.
Once you allow the distribution group in exchange to receive emails from un-authenticated users the Alerts will work.