First of all, for the machines on the network to use that server as their DNS server, the router running the DHCP service needs to be configured to tell them to do so. This would normally not be a problem, if we had a decently configurable router at the edge of the LAN. But we have a Linksys WCG200 (that's a wireless router with a built-in cable modem). It's minimally configurable, not even including the ability to change the DNS servers from the ISP-allocated ones. We also do have a Linksys WRT54G with DD-WRT that acts as a repeater (I highly recommended the WRT54G by the way, and I'm planning on buying a few more because they're so versatile with third-party firmware). DD-WRT does give the ability to set custom DNS servers, but this only takes effect for clients connected to the repeater, not to all clients in the network. To clarify this, here's an ASCII diagram of our network:
/_[wired: DNS/WWW/SMB/SVN/SSH/Squid server]
/_[wired: VoIP modem]
[WAN] --- [WCG200 gateway]
\ _[wired: TiVo, Xbox 360]
\_ [wireless: WRT54G repeater]
(that took a while to make) So the DNS propagates from the repeater to the repeater's clients, but not from the gateway to the gateway's clients.
The second problem is that, for some reason, accessing the SMB server using its DNS name (files.davenet.local) is much, much slower than using its IP address directly. I've only tried this on Windows Vista though, so I don't know if the problem is client-related. Has anyone else seen this problem?
But overall, having a DNS server is good: it's not only easier for me to tell people to access the network printer using printer.davenet.local than 192.168.1.10, but it's also just a cool thing to do.