and are you also aware of this bug
https://launchpad.net/distros/ubuntu/+source/gnome-system-tools/+bug/72341
? you have to change localhost aliases manually, to "unset" domain name 
completely.

even after that (and possible restart), system is also unusable?

-- 
System unusable when internet connection down and domain name set
https://launchpad.net/bugs/72346

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