What follows can be grouped into three steps: Installing the SMTP server, configuring the SMTP server, and configuring SSRS to use the local server.
Installing the SMTP Server
Open Server Manager, click on Local Server (on the left) and then Manage > Add Roles and Features

Click Next

Click Next

Click Next

Click Next

Select the SMTP Server and click Next

You'll get the confirm form below. Click Add Features.
Note that IIS 6 is also being installed, that's where we'll manage this

I clicked restart... but it didn't. Click Install

Part Two: Configuring the SMTP Server
Back in the Server Manager, click on the IIS 6 Manager

Expand to the SMTP Server node, right click, select properties

Click on the access tab

We're going into all three buttons: Authentication, Connection, Relay

Leave this Anonymous

This is the Connection window, and here is the magic. Configure as shown below. This will ensure that only this machine can send mail.

Click OK to the confirmation.

This is the Relay Restriction window

Cick OK to the confirmation

You might want to put an address in the 'Non-Delivery' text box below.

Take the defaults, click on Outbound Security

Confirm that it says anonymous, click OK

OK, all done there.
Go into the Services applet and set the SMTP service to start automatically.

Your SSRS report must not require a password, the data source must have a username/password stored in it. I created a report called EmailTest that had a stored password. Dropdown the menu, choose manage

On the Subscriptions tab, choose New Subscription

Fill this in as required, and you're done.
