127.0.* addresses are reserved for loopbacks. The name for the loopback
address is usually localhost and sometimes localdomain is also used with
another loopback address.

It is highly unusual to use the hostname for a loopback address. The
issues with the xserver (and maybe also other applications) should IMHO
not be fixed with a bandage like locally resolving the hostname to the
loopback address.

-- 
/etc/hosts: hostname alias of loopback
https://bugs.launchpad.net/bugs/234543
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