Okay, after getting help from a friend, I removed network-manager and
network-manager-gnome. Same bug symptoms.

Removing remaining network-manager dependencies: dhcdbd,  libnl1-pre6,
libnm-util0 solved the problem.

So this is clearly not an avahi bug. Could someone reassign this bug,
and may be point me towards relevant original bug report, if any? Many
thanks :)

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[gutsy] wired static IP doe not hold
https://bugs.launchpad.net/bugs/138895
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