Is your DNS server inside the network or is it your ISPs?
If its your ISPs, you maybe blocking it with your iptables config.
You can try tcpdump on the LAN facing interface to see if the traffic is been send out to your hosts
Code:
tcpdump -i eth1 -s 2000 "src port 53"
that is assuming that eth1 is your private LAN.
If you don't see anything, then make sure that is leaving the router
Code:
tcpdump -i eth0 -s 2000 "dst port 53"
that is assuming that eth0 is your WAN facing interface.
If you see traffic going out, then it may be your iptables configuration. If you can post an `iptables -nL -t filter` output from the router, may help out