I think I've deduced what is happening here. The combination of the
dhcp-host line and the /etc/hosts entry generates the equivalent of

dhcp-host=name,192.168.X.X

When you run Ubuntu, the DHCP requests send the name, so dnsmasq find
and uses this line, and all is good.

When the machine was rebooted with the install disk, the name is not
sent. At DISCOVER time, the 192.168.X.X address gets offered, because
that machine (based on MAC address) already has a lease on the that
address. At REQUEST time, the address is disallowed, becasue it's been
set as a static address for another machine (remember, no name to match
the dhcp-host line.)

This hasn't been seen often, because most people nail down static
addresses using the MAC address.

Given that, this should be fairly easy to fix: I believe that

http://www.thekelleys.org.uk/dnsmasq/test-
releases/dnsmasq-2.48test6.tar.gz

will do the trick.

Cheers,

Simon.

-- 
DHCP Request Cycle can get caught in infinite loop
https://bugs.launchpad.net/bugs/327703
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