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"Use the External DNS Lookup settings on the transport server "
By default Exchange will use internal DNS servers - what is configured on the network card of the server.
This setting allows you to specify different external servers for Exchange to use instead of the local ones. They are used for transport only, so shouldn't affect the operation of the server for DNS.
However the setting is not used that often, and in most cases is not required.
One example would be in a very busy environment (and I mean 10,000s of messages a minute) where separate DNS servers could be used to take the load of the AD DNS servers. However the load would have to be very high to require that kind of configuration change.
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