Is Nagios capable of covering the functionality of Logwatch

You have several questions in the same message, you might get better results splitting them up.

However, I will try to answer the sshd question and the unmatched one.

I get several thousands of failed sshd attempts per day, sometimes more. I ignore them because I use secure passwords, do not have "guest" accounts which have weak passwords, and do not allow users to choose weak passwords.

There are many probes for security every day, if not every hour. If you worry about them all, you'll go insane. The real question to ask is how secure your system is against these probes. If you have come of the common user accounts without passwords, with weak passwords, or with guest logins (without passwords or with common ones) then you should fix that. If not, well, ignore them.

The unmatched entries are from something that is accepting IPv4 addresses and displaying IPv6 "mapped addresses" -- my imapd does this. It may just be that. Can you look manually and match up PIDs?

You don't have to install Postfix. Postfix is not a dependency of logwatch. The actual dependency is postfix | mail-transport-agent, so any package that provides mail-transport-agent will satisfy the dependency.

Now, the problem is, you're not using a packaged MTA. I would recommend ditching this sendEmail thing and instead install a packaged MTA that does the same thing, like nullmailer or ssmtp. They will both provide the necessary virtual package, and will receive security updates and bugfixes if required. If you really, really have an eagerness for SendEmail, you can either package it properly, or use the equivs package to generate a dependency-satisfying stub package that'll also solve the problem.