Right, my hack is almost the same as --no-hosts, it just doesn't require
patching libvirt.

Do you need that entry in your /etc/hosts? If you have a real DNS name,
you might not need it at all. If not, but you have a static IP address,
you could use that in the hosts file instead of 127.0.1.1.

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https://bugs.launchpad.net/bugs/1326536

Title:
  libvirt's dnsmasq setup will read /etc/hosts on the host, resulting in
  odd resolution behaviour on the VM

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