dnsmasq does not forward DNS queries from NATed guests

Solution Verified - Updated -

Issue

Due to a security fix, the functionality of passing DNS records from outside of the actual network was limited.
This causes an unfortunate problem to environments where the DNS server lies outside of the actual network and Virtual Machines are trying to read records from this server.

The security fix was intended to prevent usage of hosts and Virtual Machines as a passthrough DNS server. Is there a way to resolve this issue and return to the prior functionality?

Environment

  • Red Hat Enterprise Linux (RHEL) 6.4, 6.5

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