Public bug reported:
Binary package hint: dhcp3-server
I believe this is a bug.
Ubuntu configures sets the hostname in /etc/hosts and assigns it to
127.0.1.1:
127.0.0.1 localhost
127.0.1.1 server.example.com server
The dhcpd server picks this up and sends it as primary DNS server
** Attachment added: dhcpdump.txt
http://launchpadlibrarian.net/23694971/dhcpdump.txt
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dhcpd sends 127.0.1.1 as DNS server
https://bugs.launchpad.net/bugs/340383
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