Themx-hostline needs the domain name, server name, and MX priority. Themx-targetline is the server name.localmxmeans all local machines should use this server.
A priority number of 5 means the server is higher priority than servers with larger numbers, typically 10 and then multiples of 10. If you have only one mail server, you should still give it a priority to keep clients happy.
man 5 dhclient
dnsmasq.conf is also a great help resource
dnsmasq home page (http://www.thekelleys.org.uk/dnsmasq/doc.html) is where you’ll find mailing list archives and excellent help documents
Chapter 24, “Managing Name Resolution,” in Linux Cookbook, by Carla Schroder (O’Reilly)
Please check back for the next part of the series.