Looks like RC2 breaks the smtp authentication process with sendmail due to a faulty (or unsupported) version of PEAR.php.

If I overwrite the PEAR.php file with the one from beta-1, the message appears to be sent, although the message never leaves the box. (not a fix, but a start)

Does anyone have anything better as a fix for Sendmail smtp-auth problems other than using phpmail? I am not about to open my box up to a possible mail relay problem because of some faulty php code and would rather authenticate all sends.

You are right - same problem over here!

The Error-Log prints out this: [30-Jan-2008 15:24:40 +0100] SMTP Error: SMTP error: Authentication failure: Invalid response code received from server in /../program/steps/mail/sendmail.inc on line 334

The only sulution i see is sto stick back to rc1 and waiting for the next release - hope it is gonna be fixed!