If Postfix delivers the mails, rather than Dovecot LDA, then yes you'll need to configure Postfix also to deliver correctly. Maybe it would be easier to just switch to Dovecot LDA: http://wiki2.dovecot.org/LDA
Thanks Timo for quick confirmation and the link for setting up dovecot as LDA.
I made below changes to postfix's main.cf
mailbox_command = /usr/libexec/dovecot/dovecot-lda ( verified that's correct location for file)
postfix reload
The changed mail_location as mail_location = maildir:/localdir/mail/%u
dovecot restart
/var/log/messages shows, below error,
dovecot: pop3(username): Error: user username: Initialization failed: Initializing mail storage from mail_location setting failed: stat(/localdir/mail/username) failed: Permission denied (euid=1002(username) egid=10(wheel) missing +x perm: /localdir/mail, euid is not dir owner)
Any idea what is going wrong?