DNS resolution on iPhone

I've been playing with a few iPhones lately and have had trouble getting WiFi working through our proxy. After much hair pulling the problem turns out to be a feature in the iPhone DNS resolver that refuses to look up any hostname ending in ".local". This also appears to be a problem on Mac OS X:

http://support.apple.com/kb/HT2385?viewlocale=en_US

With OS X you can add "local" to the Search Domains field and disable this behaviour, unfortunately it doesn't work for the iPhone.