DNS Server resolves server name but NOT fully qualified domain name

I have a new Windows Server 2003 machine I'm trying to configure as a DNS server and Domain Controller.

Whenever I add an XP client to the domain I get the following event log error on boot up:
"Windows cannot determine the user or computer name. (The RPC server is unavailible). Group Policy processing aborted."

This seems to be because it can't resolve the fully qualified domain name of the domain controller. I can ping the domain controller. Then I try to ping it's fully qualified domain name and it fails. Then I try to ping the fully qualified domain name with a . at the end and it succeeds. Now all attempts to ping it's fully qualified domain name succeed (until I reboot). (see below)

I can work around this by adding a host file entry mapping the IP to the fully qualified domain name but I'd like to avoid that hack if I can.

Any thoughts? Thanks.

What follows is the attempt to resolve the domain controller from a XP machine on the domain (where dc-server is the domain controller):

C:\>nslookup dc-server
Server:  dc-server.localdomain.org
Address:  192.168.42.2

Name:    dc-server.localdomain.org
Address:  192.168.42.2


C:\>nslookup dc-server.localdomain.org
Server:  dc-server.localdomain.org
Address:  192.168.42.2

Name:    dc-server.localdomain.org
Address:  192.168.42.2


C:\>ping dc-server
Pinging dc-server [192.168.42.2] with 32 bytes of data:
Reply from 192.168.42.2: bytes=32 time=1ms TTL=128

C:\>ping dc-server.localdomain.org
Ping request could not find host dc-server.localdomain.org. Please check the name
 and try again.

C:\>ping dc-server.localdomain.org.
Pinging dc-server.localdomain.org [192.168.42.2] with 32 bytes of data:
Reply from 192.168.42.2: bytes=32 time=1ms TTL=128

C:\>ping dc-server.localdomain.org
Pinging dc-server.localdomain.org [192.168.42.2] with 32 bytes of data:
Reply from 192.168.42.2: bytes=32 time=1ms TTL=128

ipconfig /all on the client follows:

C:\>ipconfig /all

Windows IP Configuration

        Host Name . . . . . . . . . . . . : LMCA8-E03
        Primary Dns Suffix  . . . . . . . : LOCALDOMAIN.ORG
        Node Type . . . . . . . . . . . . : Hybrid
        IP Routing Enabled. . . . . . . . : No
        WINS Proxy Enabled. . . . . . . . : No
        DNS Suffix Search List. . . . . . : LOCALDOMAIN.ORG

Ethernet adapter Wireless Network Connection:

        Media State . . . . . . . . . . . : Media disconnected
        Description . . . . . . . . . . . : Dell Wireless 1397 WLAN Mini-Card
        Physical Address. . . . . . . . . : 00-22-5F-61-F5-08

Ethernet adapter Local Area Connection 2:

        Connection-specific DNS Suffix  . :
        Description . . . . . . . . . . . : Intel(R) 82567LM Gigabit Network Con
nection
        Physical Address. . . . . . . . . : 00-21-70-DE-43-69
        Dhcp Enabled. . . . . . . . . . . : No
        IP Address. . . . . . . . . . . . : 192.168.42.13
        Subnet Mask . . . . . . . . . . . : 255.255.255.0
        Default Gateway . . . . . . . . . : 192.168.42.1
        DNS Servers . . . . . . . . . . . : 192.168.42.2