Hi MamaMoose,
You're experiencing what many domain owners are going through. As the system admin for a machine that handles mail for over a hundred domains and several hundred users, I feel your pain. There is little to nothing a domain owner can do to stop this.
The benefit to the spammer using a valid domain is that not only is he making it appear to the untrained eye that the domain in the sender's address is the culprit, but he also ensures that his mail is accepted for delivery even by machines that use reverse lookups to verify an existing domain. Example, my server looks up the domains as given by the sender header and the relaying machine and if they don't exist or resolve, that mail is denied. There are still plenty of techstupid spammers so I'm able to deny thousands of messages a day this way. But, as you see, there are smarter spammers who have figured out a way around this protection.
So, I look closely at the relaying machine to determine its role in spam. I find that by reading the actual spam message headers, one can pretty well determine the spam origin. Where Asia was once the predominant spam origin, it is now more likely to be your next door neighbor's machine...and he doesn't have a clue it's happening. I'm now blocking on the server, thousands of machines on dsl and cable systems that are sending mail directly, bypassing the valid mail servers of those systems. For the spammer to make this work, he needs valid domains to use in his headers. If they're the least bit smart, they'll actually pick the "small people" domains because if they spoof Earthlink or AOL, they're more likely to be tracked down and sued. I doubt you can afford this suit and neither can I.
*grin...I like Krissel's response..."Demand ...that they do their part ...or you'll go elsewhere" I'm that sort myself, but in this case, I'm sure they're doing all they can short of turning off the mail server and calling it quits. If you go elsewhere, you'll only be jumping from one frying pan to another 'cause we're all in the same fire.
My suggestion, create good spam filters in your e-mail program and be hopeful that the tide will turn.