hello in bionic
i also tried to get systemd.resolve and dnsmasq working

the /etc/default/lxc-net setup the dnsmasq using ultimately creating the 
dnsmasq shown below
the config did assign static and dynamic ip's to the containers however i could 
not access dynamic addresses by name. so i added to /etc/systemd/resolv.conf 
attached below. that worked with the effect of the cpu utilization. 

it seemed to jump up after i went to the net and was not accessing the
containers on 10.0.3.x as if systemd-resolve was sending queries to the
dnsmasq in a loop.. please look at global section has 10.0.3.1 as the
dns server and that doesn't look right. it is placed by
/etc/systemd/resolv.conf

ps ax:
dnsmasq --conf-file=/etc/lxc/dnsmasq.conf -s lxc -S /lxc/ -u lxc-dnsmasq 
--strict-order --bind-interfaces --pid-file=/run/lxc/dnsmasq.pid 
--listen-address 10.0.3.1 --dhcp-range 10.0.3.128,10.0.3.254 
--dhcp-lease-max=253 --dhcp-no-override --except-interface=lo 
--interface=lxcbr0 --dhcp-leasefile=/var/lib/misc/dnsmasq.lxcbr0.leases 
--dhcp-authoritative

with :/etc/systemd/resolv.conf
[Resolve]
#DNS=
DNS=10.0.3.1
#FallbackDNS=
#Domains=
Domains=lxc
#LLMNR=no
#MulticastDNS=no
#DNSSEC=no
#Cache=yes

i was also watching tcpdump on llxcbr0 which had no activity
after a while the systemd-resolve climbed approaching 100% with dnsmasq 50%

netstat -nlp
Active Internet connections (only servers)
Proto Recv-Q Send-Q Local Address           Foreign Address         State       
PID/Program name
tcp        0      0 0.0.0.0:22              0.0.0.0:*               LISTEN      
1643/sshd
tcp        0      0 127.0.0.1:631           0.0.0.0:*               LISTEN      
1263/cupsd
tcp        0      0 10.0.3.1:53             0.0.0.0:*               LISTEN      
2518/dnsmasq
tcp6       0      0 :::22                   :::*                    LISTEN      
1643/sshd
tcp6       0      0 ::1:631                 :::*                    LISTEN      
1263/cupsd
udp    14592      0 0.0.0.0:5353            0.0.0.0:*                           
1399/avahi-daemon:
udp        0      0 0.0.0.0:22168           0.0.0.0:*                           
-
udp        0      0 0.0.0.0:6670            0.0.0.0:*                           
-
udp        0      0 0.0.0.0:56840           0.0.0.0:*                           
-
udp        0      0 0.0.0.0:62910           0.0.0.0:*                           
-
udp        0      0 0.0.0.0:48051           0.0.0.0:*                           
1399/avahi-daemon:
udp    13824      0 10.0.3.1:53             0.0.0.0:*                           
2518/dnsmasq
udp     9216      0 127.0.0.53:53           0.0.0.0:*                           
1007/systemd-resolv
udp    10240      0 0.0.0.0:67              0.0.0.0:*                           
2518/dnsmasq
udp        0      0 0.0.0.0:68              0.0.0.0:*                           
6025/dhclient
udp        0      0 0.0.0.0:631             0.0.0.0:*                           
1481/cups-browsed
udp6    4608      0 :::5353                 :::*                                
1399/avahi-daemon:
udp6       0      0 :::59159                :::*                                
1399/avahi-daemon:
raw6       0      0 :::58                   :::*                    7           
5918/NetworkManager
Active UNIX domain sockets (only servers)

/etc/resolv.conf: is under systemd link
# This file is managed by man:systemd-resolved(8). Do not edit.
#
# This is a dynamic resolv.conf file for connecting local clients to the
# internal DNS stub resolver of systemd-resolved. This file lists all
# configured search domains.
#
# Run "systemd-resolve --status" to see details about the uplink DNS servers
# currently in use.
#
# Third party programs must not access this file directly, but only through the
# symlink at /etc/resolv.conf. To manage man:resolv.conf(5) in a different way,
# replace this symlink by a static file or a different symlink.
#
# See man:systemd-resolved.service(8) for details about the supported modes of
# operation for /etc/resolv.conf.

nameserver 127.0.0.53
search lxc

system-resolve --status:

Global
         DNS Servers: 10.0.3.1
          DNS Domain: lxc
          DNSSEC NTA: 10.in-addr.arpa
                      16.172.in-addr.arpa
                      168.192.in-addr.arpa
                      17.172.in-addr.arpa
                      18.172.in-addr.arpa
                      19.172.in-addr.arpa
                      20.172.in-addr.arpa
                      21.172.in-addr.arpa
                      22.172.in-addr.arpa
                      23.172.in-addr.arpa
                      24.172.in-addr.arpa
                      25.172.in-addr.arpa
                      26.172.in-addr.arpa
                      27.172.in-addr.arpa
                      28.172.in-addr.arpa
                      29.172.in-addr.arpa
                      30.172.in-addr.arpa
                      31.172.in-addr.arpa
                      corp
                      d.f.ip6.arpa
                      home
                      internal
                      intranet
                      lan
                      local
                      private
                      test

Link 4 (lxcbr0)
      Current Scopes: none
       LLMNR setting: yes
MulticastDNS setting: no
      DNSSEC setting: no
    DNSSEC supported: no

Link 3 (wlp58s0)
      Current Scopes: DNS
       LLMNR setting: yes
MulticastDNS setting: no
      DNSSEC setting: no
    DNSSEC supported: no
         DNS Servers: 192.168.1.1
                      2001:4888:47:ff00:406:d::
                      2001:4888:41:ff00:404:d::

Link 2 (eno1)
      Current Scopes: none
       LLMNR setting: yes
MulticastDNS setting: no
      DNSSEC setting: no
    DNSSEC supported: no

i will continue to poke but ultimately don't wish to have fixed ip's
which must be in /etc/dnsmasq.d and in etc/hosts

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https://bugs.launchpad.net/bugs/1721092

Title:
  systemd-resolved and dns-masq make CPU 100% when using lxc name
  resolution

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