If you include your hostname in the domains table, you should use this as the first postconf setting above for mydestination:

postconf -e 'mydestination = localhost, localhost.localdomain'

In other words, if your server1.example.com is mydomain.com, do not include mydomain.com in that list for mydestination if it is in the domains table, otherwise /var/log/mail.warn will give you lines like this, and email to mydomain.com will get bounced:

warning: do not list domain mydomain.com in BOTH mydestination and virtual_mailbox_domains

Otherwise, I followed this tutorial line-by-line and it works perfectly on Ubuntu 7.10 - nice work!