By default, sendmail 8.10 uses /etc/mail for all of its configuration files. Moreover, the names of the many configurations files have been changed; e.g., sendmail.cw is now local-host-names, see
cf/README for details.
It looks like you have in your sendmail.cf that you are using local-host-names and that it either has nothing in it or is not there.
The group writable directory error may or may not be that directory. To find out use the following:
$ /usr/lib/sendmail -d0.1 -bt < /dev/null
You should get something like this:
% /usr/lib/sendmail -d0.1 -bt < /dev/null
Version 8.8.8+Sun
Compiled with: LOG MATCHGECOS MIME7TO8 MIME8TO7 NAMED_BIND NDBM NETINET NETUNIX NIS NISPLUS QUEUE SCANF SMTP XDEBUG
============ SYSTEM IDENTITY (after readcf) ============
(short domain name) $w = myserver
(canonical domain name) $j = myserver.my.com
(subdomain name) $m = my.com
(node name) $k = myserver
========================================================
ADDRESS TEST MODE (ruleset 3 NOT automatically invoked)
Enter <ruleset> <address>
>
%
This will also show you which directories are not set up correctly as far as permissions.