We have set up a small Windows Server 2008 R2 network with a domain controller which is also acting as the DNS server for the network (we opted to install DNS when setting up the domain). This network isn't connected to the Internet in any way, so all machines have been configured to use the IP address of the domain controller as their primary DNS and no secondary DNS server has been configured.

If we shut down or unplug the network cable from the domain controller, DNS lookups become quite slow and the performance of the network suffers. For example, running a ping command using a hostname takes around 5-6 seconds to resolve the name.

I presume this is because it is looking for the DNS, then falling back to some other method of resolving the names as the DNS server is now gone.

All the machines have static IP addresses so we are considering just putting all entries in the HOSTS file of each machine. However, it would be nice to have a centralised DNS in case we one day change the IP of one of the machines. Is there a better way to speed this up?