Integrating CRM with hosted Exchange server that is not Office 365

I started out by setting up our domain, but it seems to be pushing me to add loads of DNS records so that Office 365 can use it.  Firstly, do I have to use an Office 365 hosted Exchange, or can I use an alternative (my Exchange is hosted with COLT CEANO) ?

When I try and create an email server profile, I only have the ability to specify a name and description - the fields to specify incoming and outgoing servers etc. are not visible.

I expect I am doing something fundamentally wrong, can anyone assist ?

Thanks.