Is this a Windows box?
I use ArGoSoft mail server to send test emails. I don't believe I had to change anything in the php.ini, though I will take a look. I can't really remember how it is setup because I haven't had to change anything with it in a long time.
I had a **** of a time getting a mail server to work though. ArGoSoft was the first one I've used that actually did what I wanted it to.