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Creating a domain controller on small domain

Last Modified: 2015-03-03
We have two virtual servers, one the primary domain controller, the other the Exchange server.
The DNS is not running properly and I am trying to locate the problem .  I have checked the DNS server on both servers and they appear to be right, but to be honest there is still much I don't understand about configuring DNS.  

Because the server manager is puching me to upgrade the Exchange server to a domain controller, I am trying to do that.  This has highlighted an issues that might be the reason for the DNS problems. when trying to upgrade the Exchange server to be a domain controller, it is reporting that "an active directory domain for the domain could not be contacted"

Can anyone point me in the right direction here.  This has been hanging over me for days now.
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