In an upgrade from 5.1.2 to 5.5 the following error occured.
when doing an nslookup query for any local dns names nslookup returns "Server failed" errors
Reason: somehow during the upgrade 'forwarders' were turn on in the DNS but not given a value. (previously forwarders were not enabled)
Solution: Run configure on the server and put a DNS forwarding address in the appropriate field. restart clear the address and restart again.
Someone cleverer than I . . will no doubt post a reply with a more direct fix for this. Hope this helps someone - gave me a headache for a little while.