help mecrury wont work

[SpecialFX]

( ! ) Warning: mail() [function.mail]: Failed to connect to mailserver at "localhost" port 25, verify your "SMTP" and "smtp_port" setting in php.ini or use ini_set() in C:\Users\Nikos\Documents\Computing\htdocs\flex\services\testemail.php on line 41
Call Stack
# Time Memory Function Location
1 0.0360 320568 {main}( ) ..\testemail.php:0
2 0.0360 320808 sendSingleEmail( ) ..\testemail.php:7
3 0.0835 331920 mail ( ) ..\testemail.php:41

( ! ) Warning: mail() [function.mail]: Failed to connect to mailserver at "localhost" port 25, verify your "SMTP" and "smtp_port" setting in php.ini or use ini_set() in C:\Users\Nikos\Documents\Computing\htdocs\flex\services\testemail.php on line 41
Call Stack
# Time Memory Function Location
1 0.0360 320568 {main}( ) ..\testemail.php:0
2 1.1446 321112 sendSingleEmail( ) ..\testemail.php:21
3 1.1449 332016 mail ( ) ..\testemail.php:41

Mail could not be sent.

[SpecialFX]

I've checked my ini, every thing is fine. Even created users in mercury and set them up in thunderbird. thunderbird can't connect to mercury.

[SpecialFX]

Now mail sent threw tb is working but when sending through php I now get

Warning: mail() [function.mail]: SMTP server response: 553 Invalid RFC821 mailbox specification. in C:\Users

any ideas?