We are using deliver only to notify them of being over quota. Everything else is coming in via sendmail. It does notify the sender of the user being over quota but the user still gets the email. Just wonder if anything else could be causing conflicting settings.
Yes, this is the correct setting, and has worked for me. But -- are you actually doing the delivery from sendmail via LMTP? The option won't do anything when mail is being delivered directly by the "deliver" program.
Might also be a sendmail configuration issue. If the over quota bounce messages say "552 5.2.2 Over quota" instead of "452 4.2.2 Over quota", lmtpd is returning a permanent error as it should, and I don't think there's anything more you can do on the Cyrus side.
Also, I think that the message which first causes the quota to be exceeded is delivered anyway.
--mika