A Domain Name Server translates a domain name into an ip address.
The lookup files for named are located in /var/named-xs/. When I was trying to get XO’s to register, I discovered that the nameserver was returning 127.0.0.1 for the school server’s ip address. When I changed that to the ip address I was assigning to the lan ethernet adapter (in this case 172.18.98.1), registration seemed to work much better. The lookup file I needed to change was /var/named-xs/school.internal.zone.db. I suspect that there is a olpc script that is supposed to set the address properly, but where the network interfaces are not properly configured, the script misbehaves.
The named service requires olpc specific setup before it will function properly. There is an install script which will need to be run which modifies files located in /var/named-xs. The tricky thing is that the name of the script changed from XS-0.6 to XS=0.7. In .6 it was called xs-config-domain and in 0.7 it is called xs-setup (see http://wiki.laptop.org/go/XS_Techniques_and_Configuration#Use_OpenDNS).