Feh, I can't believe I did that.
Yes, to sign the message, you need to provide the passphrase for *your* key. So the actual invocation would be
pgp --encrypt --recipient "user id or key id" --armor --sign file.txt --passphrase "your private key passphrase"
You should never share you private key material or passphrase with anyone.
When you first import a key into PGP Command Line, it is not trusted. So if you try to encrypt to that key, you will get a "key invalid" warning, though the encryption will complete. If you have verified that you do indeed have the public key for your recipient (by confirming with them the key fingerprint), you can sign the key to indicate that the key is valid. You do this as follows:
pgp --sign-key "user id or key id" [--signer "a signer, if not your default signer"] --passphrase "your private key passphrase"
You don't have to specify the --signer if you are using your default signing key.
This warning message is discussed in the PGP Command Line User's Guide in the FAQ (Appendix C) under "Invalid Keys".