smtp-policy problems

[Trent MacDougall <trent@infointeractive.com>]

Can anyone explain what I might be doing wrong to get the following results:

# telnet localhost 25
Trying 127.0.0.1...
Connected to localhost.
Escape character is '^]'.
220 localhost ZMailer Server 2.99.55-pre1cvs #2 ESMTP+IDENT ready at Thu, 15
Feb 2001 08:39:01 -0400
helo you
250 localhost expected "HELO localhost"
mail from:<user@x.y.net>
553 5.4.3 For MAIL FROM address <user@x.y.net> the policy analysis reports
DNS error with your source domain.
quit
221 2.0.0 localhost Out
Connection closed by foreign host.
# telnet mail 25
Trying 172.16.1.3...
Connected to mail.
Escape character is '^]'.
220 mail ZMailer Server 2.99.55-pre1cvs #2 ESMTP+IDENT ready at Thu, 15 Feb
2001 08:41:33 -0400
helo you
250 mail expected "HELO mail"
mail from:<user@x.y.net>
250 2.1.0 Sender syntax Ok
quit
221 2.0.0 mail Out
Connection closed by foreign host.
# 


These are both the same machine, but when I connect to localhost I get the
correct behaviour, but anyone else who connects is allowed to relay etc.
Any suggestions?
-- 
                Trent MacDougall @ InfoInterActive Inc.
           Network Administrator @ 902-832-2651
                 Trent.MacDougall@InfoInterActive.Com