Seth, the ball is in your court, I think. Try both approaches and see
how well either or both of them works.

I have favored the daisy-chain approach for the reasons given in comment
#27 and because I can easily see how to support that approach using
resolvconf such that it just works(tm) when packages are installed. If
the routing-by-domain-name approach is preferred then we will have to
figure out a j.w. solution for that.

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https://bugs.launchpad.net/bugs/1163147

Title:
  Please run dnsmasq in such a way that it can also be used on the host
  — to look up the VMs' names

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