Mail coming from your ISP for domain exampl1.com isn't rejected? Can it
be that you fetchmail the mail?
I ask because I bet you did not configure example1.com to be in class{w}
(means treated to be local). Do so by adding that domain to
/etc/mail/local-host-names. That is a plaintext flat file. Sendmail
daemon restart is necessary.

> Second problem I am facing is that how do I configured sendmail to the
> send
> the credentials of each user to the ISP account. For example if user1
> wants
> to send the mail to the Internet the sendmail server should connect to
> ther
> ISP server with this user credentails (username and password ) and if
> user2
> wants to send the mail to ther Internet then the sendmail should
> connect to
> the ISP server with the user2 credentails ( username and password).

http://www.sendmail.org/~ca/email/sm-812.html#812AUTH

It isn't possible to define multiple users for a single relay host target.
(With Postfix you would require release 2.3)

For different relay selections based on the sender there is

http://anfi.homeunix.net/sendmail/smarttab.html

I will go through it.