I did note that a host lookup using host -T does work, however standard DNS lookups, like when using the browser, fail. My guess is that for some reason the Cisco client does not pass UDP packets. I am guessing here. Has anyone found a solution/workaround? Is there a way to default DNS lookups to use TCP packets instead?
Don't know about that, but I just got the open source vpnc working, which doesn't steal my DNS setup. My LAN can use the connection using a MASQUERADE rule in iptables to the tun1 device, and all my DNS queries continue to go out the Internet connection instead of getting diverted to the VPN peer.