I have always entered the FQDN when prompted for the hostname during the redhat/FC install process. By doing so, the install script will add the proper "search" entry to /etc/resolv.conf. This also results in the following commands working properly:
[scowles@excelsior scowles]$ hostname --short
[scowles@excelsior scowles]$ hostname --domain
[scowles@excelsior scowles]$ hostname --fqdn
[scowles@excelsior scowles]$ ping defiant
PING defiant.mydomain.com (192.168.9.2) 56(84) bytes of data.
64 bytes from defiant.mydomain.com (192.168.9.2): icmp_seq=0 ttl=127 time=1.09 ms
As for the name you assign duing the install process.... I use a Startrek theme like excelsior, enterprise, voyager, reliant, etc... For the most part, the name I assign will never be used again because all the applications running on this server can be configured to use another more "meaningful" hostsname. Example:
MTA (sendmail or postfix) = mail.mydomain.com
Apache = www.mydomain.com
Samba = Register as fserv1 for MS networking and browsing. Also join MS AD domain.
Obviously, you would need to add the above names (aliases) to DNS or /etc/hosts for this to work properly.