I have a two computer network (desktop.linuxnet.com and laptop.linuxnet.com) with Fedora core 2 OS on both PCs
and alot of services running on it(NFS, samaba, VNC, apache etc). Everything works just fine.I recently configured sendmail on both of the
PCs to send email from one pc to another. The sendmail works fine for the localhost on both of them but when
I try to send email from let say root@laptop.linuxnet.com to myaddress@desktop.linuxnet.com , I get an error message
saying that host name desktop.linuxnet.com can't be resloved
I can ping desktop.linuxnet.com from laptop.linuxnet.com and the /etc/hosts entries are fine.
I have tried commenting out DAEMON_OPTIONS(..127.0.0.1....) thingy and added FEATURE(relay_entire_domain)dnl in
sendmail.mc file and then regenerated sendmail.cf with m4 utility but the problem persists
The rest of the setting is default.
I would appreciate if somebody could help me with this problem.

I believe that your problem is that you are using the domain names based on a host file and not DNS.

I believe that sendmail uses only DNS because of an RFC ('request for comment' or rules of the internet). I don't know which one and I don't really feel like looking it up. But basically the way around this is to create your own internal DNS server. You can use your router if it has this capability or you can use the version of BIND that came w/ FC2. You can also set up DNS to run on each independent computer so one doesn't have to rely on the other to run properly.