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0e1f616
(Get the code!)
The change suggested in this report was in fact implemented for 12.04 but it gave rise to bug #1003842.
Thus for the sake of performance improvements under unusual circumstances, some users experience inability to resolve private domain names under circumstances that are not uncommon.
My personal opinion is, therefore, that the change made here should be reverted until such time as a better solution is found for bug #1003842. But we can continue the discussion in #1003842.