Ok, I am now testing MTA interaction with my smtpd server. Sendmail barfs. Here is what I posted to comp.mail.sendmail:
Hi,
I've written a custom MTA and I testing interaction with it from other MTA's.
It seems sendmail (8.11.6 and whatever AOL is using) doesn't like my MTA, but Yahoo and Exim does. Here's a smtp log:

/usr/lib/sendmail -v jeff.test@somehost.e-dialog.com
Subject: testing sendmail

 This is a test from sendmail
.
jeff.test@somehost.e-dialog.com... Connecting to
somehost.e-dialog.com. via esmtp...
220 e-dialog smtpd server $Id: smtp.c,v 1.14 2001/12/18
19:56:38 me Exp $
>>> EHLO server1.somedomain.com
250 server1.somedomain.com Hello, how are you?
somehost.e-dialog.com. config error: mail loops back to me
(MX problem?)
>>> QUIT
250 Good bye
jeff.test@somehost.e-dialog.com... Local configuration error
/home/jeff/dead.letter... Saved message in
/home/jeff/dead.letter
Closing connection to somehost.e-dialog.com.

I don't understand why I'm getting the MX error. That is printed out by sendmail, I'm not generating it in my SMTP server. The only thing I can think that may be tripping up sendmail is that I'm doing 3 writes, one for the 250, one for the server name, and one for the message "Hello, how are you?" when I send send a response to ehlo.
Thank in advance for any pointers.

Like the message states, any pointers would be great. You can send email to me at jeff+advogato@virtualbuilder.com.