Server Authentication resolved my issue - hurray
I was using my Pocket PC (Orange M2000 with WM2003SE) Email client and configuration worked for another free pop3/smtp server but not for this one I installed with ISPConfig.
After Falko's reply I realised it could be this client so tried on Outlook Express on my PC which worked perfectly so it is down to the client I have on my PPC.
If I enable Server Authentication on my PPC it would come up with connectivity error while without server authentication it worked for internal mail destinations.
I finally tweaked with my PPC client and found that Server information contains Incoming mail, Outgoing mail and Domain where I was adding the same domain name I wanted to get email working. After deleting domain from these tried again and it worked, not sure what this domain means and why is it here, can't see such thing in Outlook Express.
I was already impressed with Falko's knowledge from previous posts and knew he will fix it.
Although my webmail issue is still there, which is probably down to the UebiMiau settings which I can't find how to fix. I used the package to install from ispconfig.com but might try squirrilmail or any other client some other time.