Email Problem (didnt find help on forum)

[eluser]Ch!ps[/eluser]
This is a little bizarre problem. I looked around the forums but did not find something similar.

I have a small application in CI. Whenever the user submits a form, email is sent to the admins (more than one). I am using the email class, with mail protocol - default. The application normally does not has any problem emailing but whenever the receiver emailID is from the same domain as where the application is hosted, it gives the following error:

"Unable to send email using PHP mail(). Your server might not be configured to send mail "

In other words, if the application is hosted at http://hostingsite.com/application/ and the email recipient list includes an email-address such as [email protected], the above error is generated in the email-debugger (no one gets email, email is simply not sent). If the email recipient list does NOT include an email-address such as [email protected], no problem - email is sent.

I am using CI 1.5.4, IIS6, Windows Server 2003.

Any help would be most appreciated