I currently have a web server in a DMZ behind my router. I was wondering today if I could use my server between my modem and my router to be used as a DNS and firewall.

I would like to do this so I would have faster DNS queries (with dnsmasq) and also hopefully have some IP filtering (using the /etc/hosts file).

Will this work?

I have the 2 ethernet interfaces. I am running Ubuntu Hardy. I can easily install dnsmasq and place 127.0.0.1 in the hosts file. I am not sure that requests from eth1 will use the /etc/hosts file as they go out eth0 to the internet (cable modem).

What am I missing in my setup/preparation? What is this type of setup called?

Thanks

You could do that, but it would be easier to just disable DHCP in the router and run dnsmasq on the server where it is now. It can handle DNS requests from clients inside of the LAN, it doesn't have to be between the router and the modem to do that.