I set it up using those settings too and I have not seen any weirdness in Lion's Mail.app. The only thing that I see that Mail.app does not handle correctly is using the Delete key or the Toolbar ...
The imap server doesn't handle sending of mail, you have to look into whatever SMTP daemon you setup. I believe RedHat still uses sendmail by default and all you'd need to do is add blah.com to ...
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