In order to ensure that the problem has nothing to do with the forwarding nameserver dnsmasq, please disable dnsmasq.
Originally Posted by speedygarth
1. Assuming that you are running Ubuntu 12.04 and NetworkManager and that NetworkManager is controlling your dnsmasq process, please edit /etc/NetworkManager/NetworkManager.conf
and comment out the line "dns=dnsmasq"
sudo gedit /etc/NetworkManager/NetworkManager.conf
then save the file and restart network-manager.
2. It is also possible that you have the standalone dnsmasq server package (called "dnsmasq") installed. If so then please remove it or disable it.
sudo restart network-manager
After you have disabled dnsmasq you should see an external nameserver address in resolv.conf instead of a loopback nameserver address.
If this is not the case, try rebooting.
# Dynamic resolv.conf(5) file for glibc resolver(3) generated by resolvconf(8)
# DO NOT EDIT THIS FILE BY HAND -- YOUR CHANGES WILL BE OVERWRITTEN