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Ok I attempted this in a little test setup running on a laptop PC with vbox and OpenSolaris.
Unfortunately I couldn't find find the SMF value for Bind in the small-zone I created so svcadm enable dns/server didn't work as couldn't find dns/server anywhere.
In global zone was absolutely fine though and was hitting the root name servers without any issues, so another words self resolving.
I am not sure if I'd need a big-zone for this to work?? But then that would not be as secure as the users then have more access to resources.