Removing the 2 lines suggested by davidfavor, actually fixed my problem
- after restarting lxc-net
(/etc/dnsmasq.conf was never empty for me)
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https://bugs.launchpad.net/bug
Bug still present under the latest lucid beta.
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NSS using LDAP on Karmic breaks 'su' and 'sudo'
https://bugs.launchpad.net/bugs/423252
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