Incoming requests in the MacDNS log file may appear with the local domain name tacked on at the end (for example, "www.apple.com.mydomain.com".) This usually occurs due to the way the client application and TCP/IP are configured on the client end. If you try to look up a name that is not terminated with a dot, the client assumes that the name is not a fully-qualified domain name and appends the default domain name to the end before sending off the request.
If your DNS client is using MacTCP, try setting '.' as the default domain name; on the client machine, type a period in the box to the left of where you entered the IP address of the DNS server.