Question: Why did everything work on your machine when standalone dnsmasq wasn't in bind-interfaces mode but /etc/NM/NM.conf contained "dns=dnsmasq"?
Hypothesis: Standalone dnsmasq started first; network-manager second. NM tried to start NM-dnsmasq but this failed because of the address conflict and NM fell back to non-dnsmasq mode, which works fine. If this hypothesis is correct then there may be lines in the syslog that look like this:
[date] [hostname] NetworkManager[pid]: <info> DNS: starting dnsmasq...
[date] [hostname] dnsmasq[pid]: failed to create listening socket for 127.0.1.1: Address already in use
Question: Why did everything work on your machine when standalone dnsmasq wasn't in bind-interfaces mode but /etc/NM/NM.conf contained "dns=dnsmasq"?
Hypothesis: Standalone dnsmasq started first; network-manager second. NM tried to start NM-dnsmasq but this failed because of the address conflict and NM fell back to non-dnsmasq mode, which works fine. If this hypothesis is correct then there may be lines in the syslog that look like this:
[date] [hostname] NetworkManager[ pid]: <info> DNS: starting dnsmasq...
[date] [hostname] dnsmasq[pid]: failed to create listening socket for 127.0.1.1: Address already in use