David --
If e-mail notifications are not working, then the team members won't know.
I personally recommend that the project manager NEVER reject a task without
informing the team member personally, either by e-mail, or by phone, or by
visiting the team member in person. I believe that doing so is a much
better project communication technique, as the project manager can tell the
team member WHY the task was rejected. Otherwise, if you only rely on the
Project Server e-mail notification, the team member will never know the
reason why the PM rejected the task and will not know how to rectify the
situation. Just an opinion. Hope this helps.