dnsmasq setup for Internet via modem
 

Would like to know how to setup dnsmasq as the caching server for my small network and to cache entries for the Internet connected via modem. Pretty new to the penquin so be gentle with me!!

Here you can do 2 things...

1. Use Iptables with proxy

2. Use proxy only
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If you are running this for office enviroment then you don't need a dns masquerading...,
Now you have to use Ip routing or NAT...
OR use squid proxy.. to use the caching... (very good proxy server)

Or use Transparent proxy..

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Now to make linux gateway you have to use iptables...
See http://www.linuxforum.com/forums

and also you can manage with transparent proxy..
which , i think is the best...