Major annoyance to any organization that has hostnames like foo.bar.domain.com — Windows 7 and Vista appends domain.com to bar, but not foo.bar. After some digging I finally found a registry hack that restores ‘proper’ functionality like any other OS or older version of windows.
Create a DWORD ‘AppendToMultiLabelName’ with a value of 1 in:
HKEY_LOCAL_MACHINE -> SOFTWARE -> Policies -> Microsoft -> Windows NT -> DNSClient
Here’s a .reg file you can run to automatically insert it. Reboot the machine to enable it.