In order to use FrontPage mail forms, the server where your website is must have the FrontPage Extensions installed.
You cannot test the email form on your local computer because it doesn't have the FPE installed on it. You must publish to the remote server and test it there.
If the FrontPage Extensions aren't installed on your server, the desire to use email forms isn't sufficiently good reason to install them. They are a misery. You can use the free NMS FormMail Perl script instead, or other form mail scripts. There are free ones and commercial ones, and at least one webhost provides one you can use, and many hosts are willing to recommend one.
Edit: Ok, I just tested it. What you're doing sounds right. You're getting the error message because the site is disk-based (it's on your local PC). Just tell it, "NO, don't remove the email address." Then publish to the remote site. The form should work fine, provided that the FPE are installed.
[edited by: SteveWh at 3:00 am (utc) on May 29, 2009]