Your php.ini is just fine so no need to post that again.
Not sure if this is required but it won't hurt and you will start to get into the habit of restarting the server components after editing ini and conf files - did you save the sendmail.ini file and restart Apache after editing also clear your browser's cache?
The authentication method is causing your email server (host) to chuck a wobbly.
Change auth on to auth plain
If that fails change to auth login
Don't change anything else other than the auth setting, save and restart Apache etc.
Also make absolutely certain that your password is correct.
See how you go as authentication method CRAM-MD5 is not being accepted by your host and this may be an automatic setting in sendmail when auth on is being used.
BTW your host is very much last century in it's attitude towards the secure transport of email and the secure transfer of user names and passwords - but this may well be intentional as IMHO all UK email is monitored.