Sorry, but it seems like caches settings, even after Network-manager has been 
restarted.
After system reboot it was fine with that option, so I copied my file 
configuration back to /etc/NetworkManager/dnsmasq.d, was also fine, but 
settings from that file did not take effect.
After reboot it stops to resolve any DNS address as per description.
here is my conf file:

#addn-hosts=/home/alex/docker/test/system-config/hosts
server=/my-super-domain.com.au/172.18.0.1

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https://bugs.launchpad.net/bugs/1764025

Title:
  Network manager doesn't work with option: dns=dnsmasq

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