your #3 looks like a much more elegant solution, from the conf files man page
# The entry '[NOTFOUND=return]' means that the search for an
# entry should stop if the search in the previous entry turned
# up nothing. Note that if the search failed due to some other reason
# (like no NIS server responding) then the search continues with the
# next entry.
So seems safe, however ive had no sucess with that method, could you post your /etc/nsswitch.conf?
I tried editing mine as per below, removing the mentioned area you said, and also tried switching dns over one, so it goes looking there after tryinog the hosts file
sophie ~ # cat /etc/nsswitch.conf
# /etc/nsswitch.conf:
# $Header: /var/cvsroot/gentoo-x86/sys-libs/glibc/files/nsswitch.conf,v 1.1 2005/05/17 00:52:41 vapier Exp $
passwd: compat
shadow: compat
group: compat
# passwd: db files nis
# shadow: db files nis
# group: db files nis
hosts: files dns mdns4_minimal mdns4
networks: files dns
services: db files
protocols: db files
rpc: db files
ethers: db files
netmasks: files
netgroup: files
bootparams: files
automount: files
aliases: files
Still no luck when the search is in my resolv.conf

