okay here is what my files look like:
/etc/sysconfig/network
NETWORKING=yes
HOSTNAME=mudd.mydomain.com

/etc/hosts
# generated by drakhosts
127.0.0.1 localhost.localdomain localhost

I went into control panel and changed Alais to House and guess what happened,
my machine named changed to mud
but my internet wouldn't work at all lolz. wtf did i do!
jschiwal, i tried your method,
i typed in hostname House
then i typed in hostname
it displayed:
House
i restarted X
didn't save any changes and still displayed my machine name as:
coffee@x1-6-00-50-8d-d1-c1-97

at least i'm learning command line stuff!

What's your /etc/hosts file look like now?

You have to restart networking and dm and X , might be easier for you to just restart.

I had the same problem, wanted to change my hostname, I entered base-config on the command line as su, that brought up the base config and I was able to change the hostname from the list of options and exit, all done, not sure if this is the correct way of doing it but it worked for me.

Edit - I should have mentioned I'm using Debian

homey this is what my /etc/hosts looks like:
# generated by drakhosts
127.0.0.1 localhost.localdomain localhost

Chig, when u say u entered base-config, I tried base-config and i'm getting:
[coffee@x1-6-00-50-8d-d1-c1-97 ~]$ file base-config
base-config: cannot open `base-config' (No such file or directory)

Ok, I have one more thing to add to the list. I did this on a PCLinux box and it's working for me.

I edited the /etc/sysconfig/network to look like this...
I edited the /etc/sysconfig/network-scripts/ifcfg-eth0 to add
NEEDHOSTNAME=no
DHCP_HOSTNAME=sony.mydomain.com
This is what mine looks like, yours may be slightly different.
I ran the command: hostname sony

I added sony to the /etc/hosts file.
Note: You may want to use 127.0.0.1 instead of the address I use which is 192.168.0.5 .

This is what I get after restarting.
[root@sony ~]#