what is the significant to allow relay on dns mx records?

I have dial up connection from jindal online here at ahmedabad.
the mailserver for jindal is mail.jindalonline.net. i can send the mails
from microsoft outlook with smtp = mail.jindalonline.net but while 
configuring sendmail with smarthost as mail.jindalonline.net , i could not send mails
from pine ..

the mails are return showing dns look back failed for localhost.localdomain.

I have never seen this kind of configuration, its ok if ISP wants to
block its relay for specific ip range but what about dns record ?

--kunal




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