I'm having an email issue, sending between 2 servers located at the same colo. Basically, if I try to send email from a pop account to a third party server, it sends/recieves fine. However, if I send to the first server on the same network, it lags for a minute and then acts like it sends (however, it never is really recieved on the 2nd server.)

I posted this problem earlier on WHT, and one individual was nice enough to suggest it is likely a network issue, that because both servers are on the same network, sendmail thinks it is sending to itself and therefor the packet gets lost. (If I understood it right).
I contacted my colocation provider to see if they could resolve it, and they asked me to try to telnet with SSH to the other server, and since I could suggested it was not a "network problem".

Here is an error message I am recieving:
<<< 220 www.cobaltns.com ESMTP Sendmail 8.9.3/8.9.3; Mon, 20 May 2002 08:15:25 -0400
>>> EHLO www.moonlightcomputing.com
<<< 250-www.cobaltns.com Hello localhost [127.0.0.1], pleased to meet you
<<< 250-8BITMIME
<<< 250-SIZE 5242880
<<< 250-DSN
<<< 250-ONEX
<<< 250-XUSR
<<< 250 HELP
>>> MAIL FROM:<moonlite@www.moonlightcomputing.com>
<<< 250 <moonlite@www.moonlightcomputing.com>... Sender ok
>>> RCPT TO:<moonlt@www.moonlt.com>

Does anyone have any ideas how to solve this or what is the source. For example, would it be a DNS setting or a Network setting, (such as gateway, subnet mask etc.)

I really appreciate any help you can provide.