OK, to start with let me warn you that I am new to sendmail...

I have installed Sendmail onto my Debian server.

I am hosting multiple domains and DNS etc... is configured correctly.

Email out from the localhost (i.e. via PHP) is working fine.
Email into the host that is subsequently forwarded to an external user, works fine

Email into the host for a hosted domain/user does not work. The mail queue reports the following when I flush it...

Running /var/spool/mqueue/nBAB8JOY003986 (sequence 1 of 1)
<myuserATmydomain...>... Connecting to local...
Operating system error

Any ideas?