I used to use another (small) machine as my LAN DHCP/DNS server (using dnsmasq) but that machine's other uses disappeared so I decided to move the dnsmasq configuration to my desktop machine. My desktop machine is on all the time because it's also a web server and I access it to read my E-Mail when I'm away from home.
So, I have configured my desktop to have a static IP on the LAN with /etc/network/interfaces containing:-
auto lo iface lo inet loopback
iface eth0 inet static address 192.168.1.4 netmask 255.255.255.0 gateway 192.168.1.1 dns-domain zbmc.eu dns-search zbmc.eu dns-nameservers 127.0.0.1 195.74.113.58 194.72.0.114
auto eth0
That 127.0.0.1 in the dns-nameservers is (I believe) correct, it makes dnsmasq act as a local caching nameserver.
Everything seems to work OK once booted but I'm getting a message on the xubuntu boot screen saying "Waiting for network configuration", that seems odd to me as it indicates that Network Manager is waiting for a DHCP response from somewhere and it doesn't need it.
I have removed the "dns=dnsmasq" line from NetworkManager.conf so that Network Manager isn't trying to run its own copy of dnsmasq.