name server vs client

[Jonathan de Boyne Pollard]

JG> What do I use as the DNS CLIENT?  Right now, the first server 
JG> is 127.0.0.1 and names are getting resolved just fine.

The (relevant) DNS client is the library that is (statically or dynamically)
linked into your applications programs.  The configuration directive listing
127.0.0.1 is denoting the IP address of a DNS _server_ to which your DNS
client sends its queries.  You are not configuring what you "use as the DNS
client".  You are configuring _what your DNS client uses_ as the proxy DNS
server.

What you "use as the DNS client" is, in fact, not easily configurable. 
Indeed, for applications that statically link to the library (a rarity, but a
possibility), it is impossible to configure without re-linking those
applications with some other library.

JG> There are two other servers, are my ISP's name servers.  
JG> Should they go first?

There's not actually much point in listing them in your DNS client's
configuration at all.

Since 127.0.0.1 is by convention an IP address of the loopback network
interface, the implication is that you have a proxy DNS server running on your
machine.  The primary point of configuring your DNS client with a list of
several proxy DNS servers is for fallback in the event of a server outage or a
partial loss of network connectivity.  However, since the DNS server is
running on the very same machine, most of the occasions where your DNS server
will suffer an outage will be those occasions where the applications that
would require the services of that server most probably will be suffering an
outage as well.  (-:

You might want to list your ISP's DNS servers in your _server's_ configuration
file, as forwardees, but that is a different kettle of fish entirely.

JG> I try to query the server from an external source [...]

An "external source" won't be able to communicate with a service that is
listening on a loopback IP address.  Is 127.0.0.1 the only address on which
your DNS server is listening ?  What IP address did you send the query to ?

JG> the answer I get seems to be from the client [...]

DNS clients don't listen on IP addresses.  If you received a response, it was
from a DNS _server_.  Perhaps it was the one that is also listening on
127.0.0.1.  Perhaps it is also a correct response to the query that you sent. 
Please show us the query that you sent and the response that you received. 
Show us the actual data, not the conclusions that you have drawn from them.