Situation is a system with XP Home, that was BADLY infested with spyware, viruses, etc. Hosts file was filled in with a large number of entries.
After everything is cleaned up and the OS reinstalled with the "Repair" option, everything seems to work - except DNS.
I can ping by IP address only, despite manually configuring all of the proper DNS values. Attempts to use NSLOOKUP result the server not being found. Attempts to ping or reach even fully qualified domain names (e.g. www.yahoo.com) result in only a NetBIOS name lookup request. There is no WINS server on the network.
My guess is that this is an artifact left over from one of the spyware packages, but I've never encountered this one before.