AFAIK, sendmail.mc has no effect on the system unless you use it to rebuild the sendmail.cf (and restart sendmail), therefore I presume that is what you have done, and that the error results from sendmail. Or perhaps it is from m4. I am not psychic.
dnl is the comment indicator for sendmail.mc. If you a a dnl in front of the line define('confAUTO_REBUILD') in the sendmail.mc file, it means that the feature defined by confAUTO_REBUILD will not be used by sendmail.