I didn't think that 587 requires AUTH;
It does. That's its entire point. (Read the RFC.)
I was pretty sure that I have used submit on localhost,
That (and what you described after) isn't 'submission'. Port 587 is all about authenticated SMTP-like email submission. Talking to sendmail on 127.0.0.1 or ::1 isn't the same thing. Long ago I taught sendmail to listen on named sockets. I had a crazy idea that /var/run/submission might become the default submission interface for local email. Sadly, it never caught on.
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