I am considering applying for a position within the company I currently work. Everyone addresses everyone at the company by first name, including how we all address the big boss.
I feel funny using "Dear Mr. Smith" and even feel funny about "Dear Joe Smith". We have met before (it's a company of 500, and we each work at satelite offices) but I don't know if he will remember me. We both attended a 60 person weekly meetin for several months. After the group meeting, we would break off into groups. I don't recall if we were ever in the same group.
If I ever saw him in a hallway I'd greet him by first name only. However, it seems too informal for a cover letter to just use the first name.
If you are not sure if he will remember you, you should err on the side of formality and use Mr. In subsequent correspondence, if he signs his e-mails or introduces himself by first name, you can probably use just his first name. The way I look at it, it can't hurt to use Mr. in your situation because you don't really know each other. I would feel differently if you knew him well though and called him by his first name all the time. Then Mr. would be weird and maybe even insulting.