What does the virtual/physical network configuration look like? Are you routing all traffic into a physical server, then through a vnet/VM, and back out some other physical interface on the server?
To be clear: not all traffic has to be routed through it, just DNS.
All that I had to do was assign a static IP address to the MAC address of the VM network interface, and configure my router's DHCP to hand out that static IP for DNS.
It's all done over a singular ethernet connection between my router and the server; the amount of traffic is very minimal.
