Code:
[mail function]
; For Win32 only.
SMTP = localhost
smtp_port = 25
; For Win32 only.
;sendmail_from = me@example.com
These are my php.ini mail settings, the same as yours.
All you need to do is install the ArGoSoft mail server (or any other mail server, but I had good luck with this one) and then add the localhost domain, and make a user.