I'm using my RouterOS as a DNS server. Windows XP clients seem to have some weird problems resolving DHCP clients that I have added static entries for. I traced it to:

C:\Documents and Settings\User>nslookup
*** Can't find server name for address 192.168.10.1: Non-existent domain
*** Default servers are not available
Default Server: UnKnown
Address: 192.168.10.1

The solution I found was to add a static entry (fqdn) for the RouterOS device at 192.168.0.1.

Sharing this in the hopes that it will help others.

MikroTik RouterOS is working as DNS cache, it is not advanced DNS server, where you can set multiple parameters and control all entries.
There should be static DNS entry, as you have to get it resolved by name.

I'm well aware that it is working as a DNS cache and my post is by no means a criticism of RouterOS. Under Windows XP, unless there is a static entry for the RouterOS machine, nslookup on Windows will fail to use the cache on RouterOS and will instead just use the provided DNS servers. From what I can tell it's a Windows problem.