Cannot assign an email address to SharePoint group (distribution groups)

Hello,
I configured incoming email awhile back in our SharePoint 2010 environment and it works great. I can assign an email address to a list and the necessary contact is created in AD in the OU I configured for incoming email and of course the item emailed in
is added to the list. However, if I try to assign an email address to a SharePoint group to create a distribution group, the following happens:
The following error has occurred while attempting to contact the Directory Management Service: The request failed with HTTP status 401: Unauthorized.
From what I've found on Technet and other resources, if incoming email works as expected, assign an email address to a group should work without issue but this obviously isn't the case. I've dug around in the 14 hive and pretty much the same exact error
is found there (with just a little more detail):
System.Net.WebException: The request failed with HTTP status 401: Unauthorized.
at System.Web.Services.Protocols.SoapHttpClientProtocol.ReadResponse(SoapClientMessage message, WebResponse response, Stream responseStream, Boolean asyncCall)
at System.Web.Services.Protocols.SoapHttpClientProtocol.Invoke(String methodName, Object[] parameters)
at Microsoft.SharePoint.DirectorySoap.SPDirectoryManagementProxy.CreateDistributionGroup(String Alias, String Name, String Description, String ContactCN, RequestInfo Info, DistributionGroupFlags Flags)
at Microsoft.SharePoint.SPGroup.CreateDMS(String dlAlias, String friendlyName, String description, String[] members, String requestor, String justification, Int32& jobId)
Any ideas what this could be? I'd imagine the timer service account has the appropriate permission on the OU as it can create objects for lists with incoming email enabled without issue.

For the issue with group members who are not added during the creation process ...
I followed this Technet article : Configure
incoming email for a SharePoint 2013 farm
But in the paragraph "Configure AD DS to be used with Directory Management Service", I added
delegation of control for the following common tasks :
Create, delete and manage groups
Modify the membership of a group
The distribution group gets created in AD with members in SharePoint 2013 ! It should work with 2010 as well…
PS : Do not forget to set up these rights, not only for the Central Administration Application pool Identity account, but for all
your Web Applications!

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Cannot assign an email address to SharePoint group (distribution groups)

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