I have configured sendmail using Linuxconf to do virtualhosting!!
Everything is working OK but I think that /usr/lib/linuxconf/lib/vdeliver
is Not using the ~/.forward files in user Home directories.
(sendmail.cf has the following entry in it for virtual email::
Mvirtual, P=/usr/lib/linuxconf/lib/vdeliver, F=lsDFMShP, S=10, R=20/40,
A=vdeliver $u $h )
Please email me if u need more information.
Closing because we don't ship linuxconf anymore.