In SQL Server 2000 I used a SQL Server authenticated user name to send emails with attachments using the xp_sendmail account. However, in SQL Server 2005 I was unable to get xp_sendmail working and after switching to using sp_send_dbmail I initially still couldn't get my SQL Server authenticated account to send emails with attachments. In the end I had to give the SQL Server authenticated account sysadmin rights. Not a very satisfactory solution but a lot easier than switching to using a windows authenticated account.
I'd be interested to hear if anyone has a more elegent solution