If you can ping google DNS cache server then IP forwarding is working. Are you allowing outgoing traffic to port 53?
Try this command to send DNS query to google DNS server directly bypassing whatever resolvers you have configured
Code:
dig @8.8.8.8 google.com
or you you have 'host' utility installed
Code:
host google.com 8.8.8.8
If you are not getting response you are probably blocking outgoing traffic to port 53 on your machine. What is your policy for the chain OUTPUT ?
If it's not ACCEPT, try running this command to allow all outgoing traffic
Code:
iptables -P OUTPUT ACCEPT
Is this machine your internet gateway? Does not look like it as both IP addresses are private. What's the output of this command?
If you specified these options as per the howto you mention
Code:
no-resolv
lare and google public DNS
server=1.1.1.1
server=8.8.8.8
You've told DNSMasq not to use servers defined in your /etc/resolv.conf but specific DNS servers above. What servers have you got in resolv.conf file, your machine is still using these. What is in there?