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If you are running a Windows network managed by a Windows 2003 or 2000 server you always need to set the IP address of the server as your primary DNS. If you don't do this you will get authentication problems, network browsing issues, connection difficulties and poor performance. This is the most common Windows 2003 network problem diagnosed in this forum!!!
The easiest way to get your computers to use the server as primary DNS is via a DHCP scope option (option 6). You can find a guide to using DHCP including setting scope options here:
For most small to medium size networks you will want to use an internet DNS server (typically your ISP's) to resolve names outside your network. This is called forwarding. The Microsoft guide below describes how to set up DNS on a 2003 server including setting up forwarders.
One reason that people often have a problem using their 2003 server as the main DNS server on the network is that they have inadvertently added a dot or root domain. This happens if you install DNS while your server is disconnected from the internet (a very sensible thing to do in my opinion - servers should be connected to the internet after they have been set up and secured). There is a guide to fixing this problem here:
DNS is very easy to set up on 2003. It really is a set up and forget, especially if you use it with DHCP. Added to that is the control it can give you with resource names on your network. For example, if you want to control the name of your intranet home page, DNS will allow you to control the alias for the host system.
Lastly, on a related topic it is best practice on small networks (less that 100 seats) to use a .local domain for you network DNS and AD domains and not your internet domain. Common practice is companyname.local where companyname is the name of your company or organisation. This and other recommendations can be found here: