can't join w7 to w2003 domain

I inherit an OLD windows 2003 server that had some really weird name and the DNS was messed up, thanks to some members here I was able to fix the DNS and is now responding and working at least at the server level, nslookup resolves and there is Internet.
this office has/had some old XP computers and they had no issues (somehow) joining the domain, but now that I am migrating (removing the old xp for a new win7 pc), the Windows 7 pc refuses to join the domain, this are the TS i've done so far:
Point the DNS to the server IP, restart the PC
do an NSLOOKUP
I got DNS req Timeout
Default Server Unknown
Address 10.194.117.251

and of course failed the internet
the server:
Microsoft Windows [Version 5.2.3790]
(C) Copyright 1985-2003 Microsoft Corp.

C:\Documents and Settings\Maurice>nslookup
Default Server:  Xserver.DOMAIN.DOMAIN.group.com
Address:  10.194.117.251

so the dns is not being propagated to the pc's 1st Issue.

I guess if I solve this I should be able to join the domain...

This is the ONY server no bells and whistles just File Server, but owner will not buy a new one, this serves his purpose, so I am just simply matching the computer user and password to the AD so the users can retrieve their docs and so far no issues but my problem is still there I cannot join the domain, but:
When I go to computer properties, change settings, and try the network ID  wizard:
If I try using the full FQDN no luck
If I try using only the server name it goes thru asking me for an admin account and password but fails after that with the classic:
An Active directory domain controller for the domain XSERVER.DOMAIN.DOMAIN.GROUP.COM could not be contacted, etc, etc.

Any suggestions, i've tried looking at the threads but I got no luck.

Thanks for your Help.