I have just finished setting up dovecot and postfix on my server (centos 5.5/apache) earlier today. So far I've been able to get email working through webmin (can send/receive to and from external domains). However, attempting to telnet xxx.xxx.xx.xxx 110 returns the following errors:

Connected to xxx.xxx.xx.xxx.  
Escape character is '^]'.  
+OK Dovecot ready.  
USER mailtest  
+OK  
PASS *********  
+OK Logged in.  
-ERR [IN-USE] Couldn't open INBOX: Internal error occurred. Refer to server log for more information. [2011-02-11 22:55:48]  
Connection closed by foreign host.  

Which further logs the following error

dovecot: Feb 11 21:32:48 Info: pop3-login: Login: user=, method=PLAIN, rip=::ffff:xxx.xxx.xx.xxx, lip=::ffff:xxx.xxx.xx.xxx, TLS  
dovecot: Feb 11 21:32:48 Error: POP3(mailtest): stat(/home/mailtest/MailDir/cur) failed: Permission denied  
dovecot: Feb 11 21:32:48 Error: POP3(mailtest): stat(/home/mailtest/MailDir/cur) failed: Permission denied  
dovecot: Feb 11 21:32:48 Error: POP3(mailtest): Couldn't open INBOX: Internal error occurred. Refer to server log for more information. [2011-02-11 21:32:48]  
dovecot: Feb 11 21:32:48 Info: POP3(mailtest): Couldn't open INBOX top=0/0, retr=0/0, del=0/0, size=0

Also, when attempting to login to squirrelmail or access the account via thunderbird/live mail etc, it obviously fails with a similar issue.

Any suggestions or outside thinking on this would be a massive help! I've pretty much exhausted every resource, and tried every suggestion for my dovecot.conf file, but so far nothing seems to work :( I feel like it may be a permissions/ownership issue, but i'm lost as to specifics.