Here's my setup...

Router
   System1
   Server1

On Server1, there's a DNS server. What I had setup before, which was kind of an ugly way of doing it, was just forwarded port 53 (tcp & udp) to Server1. It worked with a lot of fighting. Had to figure out how to make it stop forwarding its self.

Anyways. The new way I want to do it is simply add Server1's IP to /etc/resolv.conf and let the router's dnsmasq do all the work. This is working perfectly fine. Only on the intranet however. It wont respond to any internet requests.

Here's the config file:

# filter what we send upstream
domain-needed                 
bogus-priv   
filterwin2k

# allow /etc/hosts and dhcp lookups via *.lan
local=/lan/                                 
domain=lan

# no dhcp / dns queries from the wan
#except-interface=vlan1             

# enable dhcp (start,end,netmask,leasetime)
#dhcp-authoritative                       
dhcp-range=192.168.1.100,192.168.1.250,255.255.255.0,12h
dhcp-leasefile=/tmp/dhcp.leases                         

# use /etc/ethers for static hosts; same format as --dhcp-host
# <hwaddr> [<hostname>] <ipaddr>                             
read-ethers                     

# other useful options:
# default route(s): dhcp-option=3,192.168.1.1,192.168.1.2
#    dns server(s): dhcp-option=6,192.168.1.1,192.168.1.2

I can't find any documentation for using dnsmasq so it's kind of difficult to figure it out. I've done a lot of iptables stuff to try and get it to work but still nothing. I had it to ACCEPT everything... But still.. gah...

Any suggestions?