Forum OpenACS Q&A: Re: ns_sendmail failed: Expected a 250 status line; got:

Did you enter "notification-test1" as parameter setting somewhere? If yes you might want to check if it contains a leading or trailing space, e.g. if it is "notification-test1 ". Check the same for the group name.

If that turns out to be the reason please file a bug because that shouldn't be possible to happen.