This is solved by the upstream commits http://thekelleys.org.uk/gitweb/?p=dnsmasq.git;a=commit;h=2675f2061525bc954be14988d64384b74aa7bf8b "Handle binding upstream servers to an interface (--server=1.2.3.4@eth0) when the named interface is destroyed and recreated in the kernel." http://thekelleys.org.uk/gitweb/?p=dnsmasq.git;a=commit;h=16800ea072dd0cdf14d951c4bb8d2808b3dfe53d (Trivial bug fix for the previous commit)