This behavior would be expected at present. The results of the last A record lookup for that host are stored in the DB. In the event DNS lookup fails, NPM is still able to poll the device via last-known IP for that host. To test for DNS lookup failure- SAM has a built in DNS user experience template.
Rob: sorry but it's the other way around. The expected behavior for NPM would be to use DNS and not to cover for it. DNS is not NPM's job, it's to treat DDNS as such.