Took me awhile to figure this one out, so i'll leave some bread crumbs here in case anyone else is looking for the answer ...
Directly quoted from http://bliki.rimuhosting.com/space/knowledgebase/linux/mail/postfix+notes
"Say your domain is example.com. You want all your web and FTP etc to be handled on one server. And your mail to be handled by another machine (maybe mail.example.com).
You want your example.com server to run a mail server though, so things like your webapps can send emails. And apps like Logwatch can send you emails. Just the server should not/will not be the final destination for emails addressed to firstname.lastname@example.org
But, when you send email from your example.com server to email@example.com your local postfix mail server grabs the email and tries to deliver it locally" ...
and then logs an error saying it can't deliver to itself b/c of an reiterative loop.
Don't go trying to fix DNS record for the domain b/c its probably correct. Try the following:
Change: mydestination = $myhostname, localhost.$mydomain, localhost
To: mydestination = localhost.$mydomain, localhost