Well after reading the forums here, I realized my sendmail configuration is ok. I can't send because the machine is NOT in the network. I wanted to be able to sendmail from my home pc (dialup). So I guess thats why sendmail refused to sendmail...
I am relax 'cause I installed suirrelmail in the server and NOW I can send from squirrel since it is 'seen' by the server as in the network (localhost)... Well I am not a guru but after almost a week struggling with courier and sendmail It seems I now have a working Mailer Solution.
BTW the information here was VERY usefull for debugging..,.