named triggers diald

Hope someone can help. I am busy pulling my hair out. We have a Redhat 7.3
(2.4.x) box acting as a mail server running diald-1.0. When a client uses
eg. Outlook Express to send mail, Sendmail does what is supposed to and that
is deferring it. When a client send/receive mail, diald does what it
shouldn't and that is bring up the line. The line shouldn't be brought up
when a client looks for mail on the server, it is all happening locally!?
When I have a look in the messages file it indicates that the line is
triggered by "udp 169.254.0.2/1033  128.1.27.53/53". This is the named
service. I have reconfigured my dns any way you can think, but to no avail.
Has anybody had this problem or does anybody out there have an idea how I
can solve this. This obviously doesn't happen when the named service isn't
running but then you stuffed because Sendmail doesn't recognize the local
domains! Please can somebody help me!

Kind regards

Mirco