I have a server running OS X Server 10.5 and it can't resolve localhost to 127.0.0.1.

When I try ping this is what happens:

> ping localhost
ping: cannot resolve localhost: Unknown host

SSH and web browsers get similar results (uknown host). If I try using 127.0.0.1 or the ip address assigned on the LAN all of the above work.

Here's the contents of my /etc/hosts file:

> cat /etc/hosts
##
# Host Database
#
# localhost is used to configure the loopback interface
# when the system is booting.  Do not change this entry.
##
127.0.0.1       localhost
255.255.255.255 broadcasthost
::1             localhost 
fe80::1%lo0     localhost

I have no local DNS service running.

Does anyone have any idea why this might be happening or how I can fix it?