The following patch (provided by Claus Assman) fixes it:
--- deliver.c.orig Fri Mar 4 09:13:53 2005
+++ sendmail-8.13.3/sendmail/deliver.c Mon Mar 7 10:53:42 2005
@@ -5674,6 +5674,9 @@
!(m->m_argv[0] != NULL && strcmp(m->m_argv[0], "TCP") == 0))
return "localhost";+ if (*host == '\0')
+ return "localhost";
+
/*
** Check to see if this uses IPC -- if not, it can't have MX records.
*/
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