It looks like the class.phpmailer.php file is corrupt. I would download the latest version and try again.
I've always used phpMailer's SMTP feature:
$mail->IsSMTP();
$mail->Host = "localhost";
And if you need debug info:
$mail->SMTPDebug = 2; // enables SMTP debug information (for testing)
// 1 = errors and messages
// 2 = messages only