DNS resolution not working for private domain

Ennvironment:

{"build_id": "2014-09-17_21-40-34", "ostf_sha": "64cb59c681658a7a55cc2c09d079072a41beb346", "build_number": "11", "auth_required": true, "api": "1.0", "nailgun_sha": "eb8f2b358ea4bb7eb0b2a0075e7ad3d3a905db0d", "production": "docker", "fuelmain_sha": "8ef433e939425eabd1034c0b70e90bdf888b69fd", "astute_sha": "f5fbd89d1e0e1f22ef9ab2af26da5ffbfbf24b13", "feature_groups": ["mirantis", "experimental"], "release": "5.1", "release_versions": {"2014.1.1-5.1": {"VERSION": {"build_id": "2014-09-17_21-40-34", "ostf_sha": "64cb59c681658a7a55cc2c09d079072a41beb346", "build_number": "11", "api": "1.0", "nailgun_sha": "eb8f2b358ea4bb7eb0b2a0075e7ad3d3a905db0d", "production": "docker", "fuelmain_sha": "8ef433e939425eabd1034c0b70e90bdf888b69fd", "astute_sha": "f5fbd89d1e0e1f22ef9ab2af26da5ffbfbf24b13", "feature_groups": ["mirantis"], "release": "5.1", "fuellib_sha": "d9b16846e54f76c8ebe7764d2b5b8231d6b25079"}}}, "fuellib_sha": "d9b16846e54f76c8ebe7764d2b5b8231d6b25079"}

Steps to reproduce:

-a functionnal external dns server serving mydomain.local and also forwarding for internet name resolution
-a host defined in this domain : ex. puppet.mydomain.local -> 10.1.2.3
-install fuel and specify:
 domain: openstack.mydomain.local
 search domain: openstack.mydomain.local
 internal name server: 10.1.1.4, 10.1.1.2
-deploy nodes on Ubuntu 12.04
-ssh to node
-ping puppet.mydomain.local: receive "ping: unknown host puppet.mydomain.local"

Expected result:

Fuel server should be able to resolve hosts in mydomain.local

Additional info:

Fuel server is able to communicate with dns server but the local dnsmasq server seems unable to resolve anything in mydomain.local

[root@fuel ~]# cat /etc/dnsmasq.upstream
search openstack.mydomain.local
domain openstack.mydomain.local
nameserver 10.1.1.4
nameserver 10.1.1.2

[root@fuel ~]# host puppet.cptaq.local 10.1.1.4
Using domain server:
Name: 10.1.1.4
Address: 10.1.1.4#53
Aliases:
puppet.mydomain.local has address 10.1.2.3

[root@fuel ~]# host www.google.com 10.20.0.2
Using domain server:
Name: 10.20.0.2
Address: 10.20.0.2#53
Aliases:
www.google.com has address 74.125.131.106
www.google.com has address 74.125.131.105
www.google.com has address 74.125.131.104
www.google.com has address 74.125.131.99
www.google.com has address 74.125.131.103
www.google.com has address 74.125.131.147
www.google.com has IPv6 address 2607:f8b0:400c:c03::6a

[root@fuel ~]# host puppet.mydomain.local 10.20.0.2
Using domain server:
Name: 10.20.0.2
Address: 10.20.0.2#53
Aliases:
Host puppet.mydomain.local not found: 3(NXDOMAIN)