I believe I got back to sergey on this one via private email.
Are you on Win32? if so, you need to create a POP3 account, and you need to edit your php.ini file.
Make the sendmail_from... user@domain.com
Also make sure SMTP points to the address of your mail server, something like... mail.domain.com
If you are on un*x apache, it sounds like it may be something with sendmail, and that is outside my area of expertise, but you may want to test the sendmail_path without the -t and -i flags, which I believe are optional.
--ph