The system dnsmasq in this case is Network Manager's which can't be as
easily configured as a regular dnsmasq.

The idea in this scenario was to use libvirt's dnsmasq to resolv the VM
dns and IPs and then use the system's dnsmasq for regular resolving.
It's actually rather ugly but should work fine if using head rather
base.

Resolving would essentially be done this way:
 1) User makes any DNS query
 2) libc looks at /etc/resolv.conf and uses the first entry which points to 
192.168.122.1 (second points to 127.0.0.1)
 3) libvirt's dnsmasq either responds with the IP of a local VM or continues 
resolving using /etc/resolv.conf, discarding itself to avoid a loop (that bit 
will need fixing) and hitting 127.0.0.1 instead
 4) 127.0.0.1 is configured by Network Manager and so has the external DNS 
servers as its upstream
 5) The query is sent to the external DNS servers and result sent back to the 
user

As I said, rather ugly but hopefully can be made to work by either
making sure dnsmasq doesn't try to query itself or by having it use
Network Manager's resolv.conf directly and not the resolvconf aggregate
of head + NM's resolv.conf (so just using 127.0.0.1 as its upstream and
not 192.168.122.1 + 127.0.0.1).

** Changed in: resolvconf (Ubuntu)
       Status: New => Invalid

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https://bugs.launchpad.net/bugs/917896

Title:
  resolvconf no longer honors resolv.conf.d/base

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