I'm having a problem understanding exactly what DNS servers should be listed in domain-servers-option - do I list the servers associated with my ISP? Or do I list the wan nic's IP address, which has DNS servers associated with its configuration?
You list the DNS servers you want your DHCP clients to use to resolve hostnames. If you're running your own DNS server, even if only a caching server, I'd use that. Otherwise, your ISP's nameservers.
On forwarding and NAT, isn't masquerading only for situations where your own IP is dynamically assigned each time you connect?
No, masquerading is for where the addresses on your LAN are not to be "seen" by the Internet. This would typically be when you are using RFC 1918 private addresses for your LAN (e.g. 192.168.x.x). Whether your (external) Internet address is static or dynamic doesn't matter.
Paul.
