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When you set up the server install the dhcpd package (this is the DHCP server software). Configuration is pretty simple if you read the man page/google a bit. I got my set up here up and running ...
Both are set to DHCP. On the dhcp server side - running isc-dhcp - I can configure the search domains. The client goes to the dhcp server for interface0 and gets foo.org as a search domain.