1. Do you have dynamic updates enabled? If so, add a new host to your network (or change the IP address of an existing host) and see if the change is reflected in DNS.
2. Can your clients access machines on the local network by using hostnames/fully qualified DNS names?
3. Can your clients access Internet resources using FQDNs? (Assuming that you've enabled Internet access for your clients, obviously.) Use nslookup to verify the correctness of DNS entries in your DNS server -- see the following link for information about the syntax of this useful command: http://www.microsoft.com/resources/documentation/windows/xp/all/proddocs/en-us/nslookup.mspx
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