I had a similar problem, and the only way I could solve it is
by making changing the appropriate  lines in sendmail.cf to 
# my official domain name
# ... define this only if sendmail cannot automatically determine yourdomain
Djislip.math.sunysb.edu

thus making it believe that my machine's name is islip.math.sunysb.edu
(which does exist, which anyone on the net can verify), rather than
localhost.localdomain. There are better ways of doing things, I know,
but this is a quick and dirty way to make it work. I tried
masquerading also - didn't work for me, don't know why. Of course, i also
put my return address in .emacs file: 
(setq user-mail-address "[EMAIL PROTECTED]") 
(I am using emacs as MUA). 
        Best,
        Sasha

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