
An internal server error normally means a setup error! Are you sure that the setting you are using are correct or your server has this feature (sendmail etc).
You can test this by sending and email to the webmaster group (The smallest group of any website normally) wothout any problems, then you will know this works. If not you will have to look at your settings.
If the case is that you can send emails to the webmaster group and not to al groups, switch on PHP debugging, try again and post the results of any error here.
Personally I think that it is either a server setup problem or a configuration aspect on your site m8

ATB
Catz