Isn't Squirrel just an interface? He's going to need something a little more than that - Postfix is the thing you need.
Now, having done exactly this for a long time (and having also moved everything over to Gmail for domains) I have a few observations:
- running your own email server gives you a warm inner glow and feeling of independence, but that's about it.
- check your logs daily, intrusion attempts happen constantly.
- dedicate the box to email only, that is - close down every port you don't need.
- don't run anything you don't need on that box.
- for the love of god don't run php (which might cut out squirrel mail).
- you'll need a set of good spam handlers. There's some good suggestions in posts below.
Personally, if you were really going to do this, I'd get a Mac mini. It comes with everything you need in terms of unix tools by default. It runs low power, it runs quiet. And there's slightly less chance of you getting owned. Always kep your patches up to date.
I eventually moved away from this because I got tired of being a paranoid sys-admin at home. Dealing with uptime issues also made me rethink what I was doing when email started to become critical to my finances - you'd be surprised how unreliable home dsl and power systems are when you really, really need them.