However, if you're using something like Microsoft Firewall Client Management software, that could be doing the DNS queries for you.
Try disabling any proxy software and see if that works.
You used to need to reboot for changes to take effect in Windows 9x. However, you may need to restart any applications that do internal hostname or DNS caching, such as web browsers. A monitoring with Proc Mon of ping could help to see which process is called while trying to resolve a domain..
I use Windows Vista connect to an office via a VPN.
I use the LMHOSTS file to define names for IP addresses the other side of the VPN.
To attempt to resume configuration, restart the computer."Every time I restart the computer, the process repeats and I end up at the same place.
I've started the reformatting process over twice and keep coming to this roadblock.