Just having a quick poke around, found this;-http://ubuntuforums.org/showthread.php?t=1251384
"The source of the problem is most likely that ppp client fails to respect the prepend domain-name-servers line in dhclient.conf. The resolution should probably be included in some FAQ about PPP and dnsmasq (or similar local dns cache) (I found it in a debian bug), but because I had to (again) google this up when setting up a new Ubuntu (10.4 amd64) laptop and landed in this thread, here's the missing magic:
sudo apt-get install resolvconf"
Also a registered bug on Debian - http://bugs.debian.org/cgi-bin/bugreport.cgi?bug=596507
Seems to suggest that you are putting the prepend in the wrong place;-
"Apparently, the 'new' location for the 'dhclient.conf' file is '/etc/dhcp', as opposed to the old location '/etc/dhcp3', which is where the old dhcp3-client put things."