The problem is that clients set up to use the Webhost servers receive mail fine, but cannot access their smtp server, we have to use the ISP's smtp server to send mail even though we are using the Webhost POP3 server to receive.
This is far from unusual. In fact, you should use your ISP SMTP service for outgoing mail. They will allow relaying for hosts inside their network (if they were really denying your hosts relaying, you could not send any mail right now.) As far as the Web host, they are the ones that are denying relaying (as they should. You are not in their network.) If you truely want to send email via your Web host, I'm fairly certain they probably provide SMTP auth via TLS or SASL (which means you simply select "My server requires authentication" in Outlook and store your POP3 credentials there.)
Keep in mind, you can have two POP3 accounts that both send email via your ISP as POP3 and SMTP are entirely different. Makes no difference because when the person that you sent the email to responds, the "from" email will be whatever you set it as (personal or business) depending on the account you used (just select the account from your "FROM" dropdown when creating a message before sending.)
You can setup your own SMTP server, however, and simply set your email client(s) to use that host. You need not worry about firewalling unless you actually setup your domain (assuming you have a domain for email) to point at your new mail server. I suggest qmail or Exim.