Thank you Gergely. The subtle code changes in email.php allowed PHPMailer class to function just perfectly. I can now proceed to update to PHP 5.6
So for anyone wanting a simple implementation guide here it is....
The Definitive PHPMailer Install Instructions
My Store Store Owner My Company
E-Mail Address firstname.lastname@example.org
E-Mail From email@example.com
Send Extra Order Emails To: firstname.lastname@example.org
E-Mail Options E-Mail Transport Method smtp
E-Mail Linefeeds LF
Use MIME HTML When Sending Emails true
Verify E-Mail Addresses Through DNS true
Send E-Mails true
Download PHPMailer from https://github.com/PHPMailer/PHPMailer (current version 5.2.23) & upload to catalog/ext folder
Backup email.php files
/includes/classes/email.php (these two files are identical)
Replace (around lines 519), or replace your Pear code:
Replace host, username and password values with your Authenticated SMTP parameters.
Now all auto-generated emails from oscommerce will be sent with HTML, with a from address of My Company <email@example.com>
Emails sent via Tools -> Send Email, and newsletter emails will be send with HTML, with a from address of firstname.lastname@example.org.