Please don't do this. The .local TLD is a reserved namespace for MDNS. MDNS is used extensivly by Apple in their Bonjour technology which is built into OS X, and typically finds it's way on to Windows computers via an iTunes installation. If there is ever the possiblity that Macs will be added to your network, do not use .local for your internal TLD. In fact, you really shouldn't be using any reserved namespace for your internal DNS. Trust me, you'll save yourself hours of potential headaches down the road when you don't do this. If you're stuck with this configuration, there are work arounds. None of them are great.
Workaround 1: How to make Mac OS X do dot-local lookups using both multicast and unicast queries
Workaround 2: Mac OSX 10.7 (Lion) Using .local Domain (Centrify DirectControl)