Very strange, because the line
UPDATE configuration SET configuration_description = 'Defines the method for sending mail.<br /><strong>PHP</strong> is the default, and uses built-in PHP wrappers for processing.<br />Servers running on Windows and MacOS should change this setting to <strong>SMTP</strong>.<br /><br /><strong>SMTPAUTH</strong> should only be used if your server requires SMTP authorization to send messages. You must also configure your SMTPAUTH settings in the appropriate fields in this admin section.<br /><br /><strong>sendmail</strong> is for linux/unix hosts using the sendmail program on the server<br /><strong>"sendmail-f"</strong> is only for servers which require the use of the -f parameter to send mail. This is a security setting often used to prevent spoofing. Will cause errors if your host mailserver is not configured to use it.<br /><br /><strong>Qmail</strong> is used for linux/unix hosts running Qmail as sendmail wrapper at /var/qmail/bin/sendmail.', set_function = 'zen_cfg_select_option(array('PHP', 'sendmail', 'sendmail-f', 'smtp', 'smtpauth', 'Qmail'),' where configuration_key = 'EMAIL_TRANSPORT';
is about the 4th line in the 1.3.5-1.3.6 sql update file. I hope it's the only one missing?
I guess run the sql in phpMyAdmin, check that the config table entry has updated, and be aware of this as a potential cause of any other missing entries?