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How can I set up DNS on this small LAN?

We have:
4 x workstations running Windows 7 Professional
1 x 2008 R2 Foundation Server (DNS & DHCP services installed)
1 x D-Link Wifi Router connected to their DSL modem


How should I set up their DNS / DHCP?  Right now the server is set to look to 127.0.0.1 as the primary and the router as the secondary, but not sure if this is the best practice.  The workstations are set to the same.  All DHCP comes from the router.  The router is set up with 8.8.8.8 as the primary DNS and 8.8.4.4 as the secondary.
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becraig
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Ok so I am not sure I am following the architecture here:
1.  You have DHCPP on the router which assigns addresses to the workstations ?
(If so then whatever you configure on the router for DNS will be what the workstations pick up)
2.  Are you asking to have the DHCP server responsible for IP assignments instead ?
(If so then the path would be to disable DHCP on the router and have the DHCP server assign addresses as well as DNS configuration)

3. If the aim is to leave DHCP on the router then simply add the static ip of the dns server as one of the dns servers used for resolution on the router( so all pcs will get that address) and be sure forwarding is turned on for internet name resolution on the DNS Server so any internet queries are forwarded.
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Yes, the way I set it up was to have the router giving off DHCP and DNS.  But, I was told that this instead would be the best way to go about doing it:

Internet DSL Modem --->

D-Link Router (Wifi, Routing) --->

2008 R2 Foundation Server (DHCP, DNS)  --->

Clients (Dynamic IP, Primary DNS set to the server, secondary set to none).


Setting up DHCP would be no problem, but I was told to set up DNS forwarding (as you said )and disable root hints, which I'm not familiar with doing.
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I set the forwards to my router's IP address: 192.168.1.1.  The router is set to Google's DNS servers.  Is this OK?  It appears to work.


I don't know if there's a utility that will confirm if DNS is working as expected.  Like a traceroute utility, but for name resolution.


Edit: I set one of the clients to use the server's address for DNS and did a ipconfig /flushdns.  It was able to reach Google and other sites again no problem.  I don't know if this is enough to confirm that it is working.
Update:

I activated a DHCP scope with a new IP address range / DNS settings and disabled DNS resolution & DHCP on the router and the client, after restarting, couldn't connect to the Internet.  Further, it still had the same IP address as the router was previously giving.

Anyways, I didn't want to take a chance and left the configuration as-is because if the computers stop communicating over the Internet, then I wouldn't be able to easily get to the site in person.

Is there anything I'm missing?  
*I have DNS installed and it's forwarding to the router (verified).  
*The router is set to Google's DNS server address, and name resolution for Internet sites works.
*DHCP is set to a new range of addresses with the server as the only DNS server.
*The client is set to use just the server for DNS.
You can use nslookup to test dns

e.g.

nslookup
set q = a
www.domain.com


This should tell you if your dns resolution is working.

your config looks ok to me for what you need.
Thanks, it worked.