It sounds like my problem is similar to this guys:
after much pulling out (of grey hairs only), i finally realised this was a transport issue.
The transport data was being held in Mysql, and was not being resolved.
My best guess is that because i had smtp:mail.mydomain.com as the only transport it therefor wouldn't know about anything locally.
anyhow - all sorted now, will more on to more exciting things now
Thanks for the hand!
But I'm not sure how to go about fixing this.