clients on LAN cannot resolve local DNS names

Hello all, Im new here and I've been giving Sophos a try to replace my Sonicwall but Im having a very warm time.

I have my XG setup in gateway mode, my LAN is 10.0.168.1 and is acting as my DHCP and DNS server. I have a number of clients 68.2, 68.3, etc most of these clients are DHCP.

I read somewhere that the XG wont automatically register my DHCP clients in DNS so I've added them manually under Networking>DNS>DNS Host Entry however when I try to resolve a dns name from a windows client it gives

DNS request timed out
  timeout was 2 seconds.
Default Server: UnKnown
Address: 10.0.168.1

The clients gateway and DNS is set to 10.0.168.1

Here's the strange part, if I SSH to the XG from command line I can ping the local servers using the dns names I've added, however there is about a 1sec pause before the ping actually starts flowing.

So 3 questions

1) How can I get DNS working on the clients?

2) How do I resolve the 1sec delay when I ping from the XG console?

3) Is there really no way for the XG to automatically add DHCP clients to DNS table? This is basic functionality of most routers.

Thanks