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Improvement
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Resolution: Fixed
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Normal
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None
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None
The current behavior, which updates the 127.0.0.1/::1 lines in /etc/hosts with the name from /etc/conf.d/hostname can be problematic with some software, like dnsmasq. I described the problem in more detail in this thread:
http://forums.funtoo.org/viewtopic.php?id=1569
I think it would also be a good idea to add a note to /etc/hosts that makes it clear that /etc/init.d/hostname updates the file, so users know where to look if they have issues.