You've got a bad .MAIL file in LISTSERV's spool that contains mail-merge
commands.  (Well, it's probably not a bad .MAIL file per se, but the
point is that you aren't using LSMTP as your outbound mailer, so it
fails.)  You can grep through the existing *.MAIL files in the spool
for "XMRG" and identify the file or files causing the problem, then
simply stop LISTSERV and remove the file(s) from the spool.

Nathan