When I go to enable BIND DNS Server in the virtualmin plugins page, I get this error:
Failed to save enabled features : Virtualmin is configured to setup DNS zones, but this system is not setup to use itself as a DNS server. Either add 127.0.0.1 to the list of DNS servers, or turn off the BIND feature on the module config page.
My question is, what is the main function of bind dns? And do I need it in order to setup multiple domains on my server?
I think it`s the same Error that I get.
After upgrading virtualmin-base this Error appears also in a fresh Installation too.
Greets
Thomas
Do exactly what it says to do. 
This is so that Webmin can display pages on virtual servers whose DNS zones have not yet propagated to the Internet at large yet (the page editor also relies on this, among other things).
To do that, browse to Webmin:Networking:Network Configuration:Hostname and DNS Client.
In the DNS servers list, add 127.0.0.1 as the first entry (and move the others down).
Save it.
BIND is a name server. It maps names, like virtualmin.com, to addresses like 70.86.4.238.
If you want Virtualmin to manage your DNS entries, then you must enable BIND DNS. If you want to manage your DNS elsewhere, manually, then you don’t need it. I recommend letting Virtualmin handle it if you have more than one or two domains. Managing name service and getting all of the records right (including SPF, NS, MX, etc.) can be time-consuming work, even if you use a service that makes it relatively easy.
I’m not sure how to answer this without adding to your confusion. The two are orthogonal, but you need name service happening somewhere for name-based virtual hosting to work.
So, the answer is no…but you’ve gotta get name service from somewhere for ANYTHING to work on your system, so you might as well let Virtualmin do the heavy lifting for you. The only time I would suggest otherwise would be if you are on a system of limited resources (say, less than 256MB) and you’d like to use those resources just for providing fast web service. Mail is the biggest resource hog and the first thing that should be outsourced if going that route…but DNS also requires a few MB and some CPU to operate.
The Bind DNS server allows other computer users everywhere to type in the name of your computer into their browser and get your website.(www.example.com). Plus, a lot of other stuff won’t work if bind is not working, ftp,mail, etc. Your error message seems to indicate that you are missing a zone in bind with address 127.0.0.1 and hostname localhost. Networking is probably not going to work properly [color=#FFFF00][/color]if it’s not there.
Example server ip: 123.123.123.123
Ok second question. When I go to virtualmin -> system -> recheck config everything is fine. Should the default ip address for virtual servers be 127.0.0.1 or should it be 123.123.123.123?
I asked this because earlier in the module config, virtualmin could not detect my network interface for virtual servers automatically, I had to choose my network interface manually. My server has 3: lo, venet0, and venet0:0. The ip address of lo and venet0 are both 127.0.0.1. The ip address of venet0:0 is 123.123.123.123.
When I apply the changes when 127.0.0.1 is added or when I reboot my server (CentOS 5.5) the 127.0.0.1 entry disappears again.
Does anyone know what might be overwriting the entry? How can I keep 127.0.0.1. there permanently?
Chances are that’s happening due to your IP address being obtained by DHCP. By default, the DHCP client will set a number of things, including the DNS servers.
To prevent that, edit (or create) /etc/dhclient-eth0.conf, and make sure there is a line like this:
prepend domain-name-servers 127.0.0.1;
This helped.
If you are in Centos 5.6, it is in /etc/dhcpd.conf
Using Virtualmin may be in /etc/dhclient-eth0.conf (…or whichever port you are using, eth1, etc.)
If using Cloudmin KVM, create a file named /etc/dhclient-br0.conf and add it in there.