After fixing the above bug, I see a couple of things that are needed to make this work. (after I get this all worked out, a Tutorial might be in order).
In the Options settings, the user and ID to set are those for the account where you will send the messages that contain your posts. In the first line of the message itself, you have to enter a userID:password, and this should be for a user that has permission to post on your blog (let's call it 'email'). I recommend setting up a separate user just for mobile postings, since the userID and pwd are transmitted in clear-text in the message.
After sorting out all of the above, I got success! (sort of). When I open wp-mail.php script in a browser, or run "php wp-mail.php" in a shell prompt, I see that the latest message in the 'email' account has been processed by the script, that the user ID and password, as well as the subject and contents of the message were extracted, and that the script also deleted the message - good, that way the account is self-flushing.
However, the script also writes SQL to insert the latest message into the WP database, and this SQL has an error in it:
[You have an error in your SQL syntax near ')' at line 1]
INSERT INTO wp_posts (post_author, post_date, post_content, post_title, post_category) VALUES (3, '2004-05-07 16:25:02', 'First post by e-mail! This means that I can now blog from just about anywhere there is internet coverage or cellular coverage. Great!', 'First post by e-mail!', )
I suspect that the trailing comma might be the error, and will investigate.