> The "allow-downgrade" mechanism should detect such instances and
accept them without DNSSEC validation.

I don't think that's the intent of DNSSEC=allow-downgrade.

IIUC, dnsmasq, regardless of the presence of --dnssec, understands how
to respond to DNSSEC queries. When systemd-resolved asks for DNSSEC
validation of foo.lxd, dnsmasq says "I can't validate that" by sending
an empty response for the validation.

In particular, because the response from dnsmasq contains the DO flag,
and an empty RRSIG, systemd-resolved concludes "this server understands
DNSSEC, and the record is unsigned, therefore validation failed". At
least, that's my basic understanding of the systemd-resolved logic [1].

If, on the other hand, dnsmasq responded with some garbage that
indicated it doesn't even _understand_ DNSSEC, systemd-resolved would
invoke the allow-downgrade fallback, and accept the response without
validation.

[1] https://github.com/systemd/systemd/blob/v257.8/src/resolve/resolved-
dns-server.c#L699

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https://bugs.launchpad.net/bugs/2119652

Title:
  systemd-resolved-dnssec breaks name resolution on lxd domain

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