Wildcard CNAME record specified by libvirts dnsmasq:options namespace doesn't work, only specific subdomains works

Since v5.6.0, libvirt added a dnsmasq namespace with the element, which allows to specify options directly to the underlying dnsmasq server. I'd like to create a wildcard DNS entry for my applications with that option. So I used virsh net-edit, changed <network> to <network xmlns:dnsmasq='http://libvirt.org/schemas/network/dnsmasq/1.0'> and added the following options:

  <dnsmasq:options>
    <dnsmasq:option value='cname=boards.cnx65-k8s.hobel.internal,cnx65-k8s.hobel.internal'/>
    <dnsmasq:option value='cname=*.app.cnx65-k8s.hobel.internal,cnx65-k8s.hobel.internal'/>
  </dnsmasq:options>

After that, the network was restarted (virsh net-destroy && virsh net-start) and the targeting VM too (virsh destroy && virsh start).

The cname=boards.cnx65-k8s.hobel.internal works perfectly:

$ dig +short boards.cnx65-k8s.hobel.internal @192.168.10.1
cnx65-k8s.hobel.internal.
192.168.10.136

But dig +short x.app.cnx65-k8s.hobel.internal @192.168.10.1 doesn't resolve to any ip address. The generated configuration file /var/lib/libvirt/dnsmasq/hobel.internal.conf contains both cname entries at the end:

strict-order
user=libvirt-dnsmasq
local=/hobel.internal/
domain=hobel.internal
expand-hosts
pid-file=/run/libvirt/network/hobel.internal.pid
except-interface=lo
bind-dynamic
interface=virbr1
dhcp-range=192.168.10.10,192.168.10.254,255.255.255.0
dhcp-no-override
dhcp-authoritative
dhcp-lease-max=245
dhcp-hostsfile=/var/lib/libvirt/dnsmasq/hobel.internal.hostsfile
addn-hosts=/var/lib/libvirt/dnsmasq/hobel.internal.addnhosts
cname=boards.cnx65-k8s.hobel.internal,cnx65-k8s.hobel.internal
cname=*.app.cnx65-k8s.hobel.internal,cnx65-k8s.hobel.internal

According to this answer, I added auth-server and interface-name to the options:

  <dnsmasq:options>
    <dnsmasq:option value='cname=boards.cnx65-k8s.hobel.internal,cnx65-k8s.hobel.internal'/>
    <dnsmasq:option value='cname=*.app.cnx65-k8s.hobel.internal,cnx65-k8s.hobel.internal'/>
    <dnsmasq:option value='auth-server=cnx65-k8s.hobel.internal,virbr1'/>
    <dnsmasq:option value='interface-name=cnx65-k8s.hobel.internal,virbr1'/>
  </dnsmasq:options>

But x.app.cnx65-k8s.hobel.internal is still not resolved:

$ dig x.app.cnx65-k8s.hobel.internal @192.168.10.1

; <<>> DiG 9.16.1-Ubuntu <<>> x.app.cnx65-k8s.hobel.internal @192.168.10.1
;; global options: +cmd
;; Got answer:
;; ->>HEADER<<- opcode: QUERY, status: NOERROR, id: 43624
;; flags: qr rd ad; QUERY: 1, ANSWER: 0, AUTHORITY: 0, ADDITIONAL: 1
;; WARNING: recursion requested but not available

;; OPT PSEUDOSECTION:
; EDNS: version: 0, flags:; udp: 4096
;; QUESTION SECTION:
;x.app.cnx65-k8s.hobel.internal.        IN      A

;; Query time: 0 msec
;; SERVER: 192.168.10.1#53(192.168.10.1)
;; WHEN: Sat Jul 03 12:14:05 CEST 2021
;; MSG SIZE  rcvd: 59

Why is this not working? Even the official libvirt documentation lists a cname wildcard entry as example:

<dnsmasq:option value="cname=*.foo.example.com,master.example.com"/>

I think you have a dnsmasq configuration problem; maybe the interface name? It looks like you can use a wildcard. Given the following configuration for my default network:

<network xmlns:dnsmasq='http://libvirt.org/schemas/network/dnsmasq/1.0' connections='1'>
  <name>default</name>
  <uuid>34eaa498-ba0f-4762-a0f9-27f53dd07687</uuid>
  <forward mode='nat'>
    <nat>
      <port start='1024' end='65535'/>
    </nat>
  </forward>
  <bridge name='virbr0' stp='on' delay='0'/>
  <mac address='52:54:00:5d:a7:ff'/>
  <ip address='192.168.122.1' netmask='255.255.255.0'>
    <dhcp>
      <range start='192.168.122.2' end='192.168.122.254'/>
    </dhcp>
  </ip>
  <dnsmasq:options>
    <dnsmasq:option value='cname=foo.example.com,master.example.com'/>
    <dnsmasq:option value='cname=*.foo.example.com,master.example.com'/>
    <dnsmasq:option value='auth-zone=example.com'/>
    <dnsmasq:option value='auth-server=example.com,*'/>
  </dnsmasq:options>
</network>

I end up with /var/lib/libvirt/dnsmasq/default.conf that looks like:

strict-order
pid-file=/run/libvirt/network/default.pid
except-interface=lo
bind-dynamic
interface=virbr0
dhcp-range=192.168.122.2,192.168.122.254,255.255.255.0
dhcp-no-override
dhcp-authoritative
dhcp-lease-max=253
dhcp-hostsfile=/var/lib/libvirt/dnsmasq/default.hostsfile
addn-hosts=/var/lib/libvirt/dnsmasq/default.addnhosts
cname=foo.example.com,master.example.com
cname=*.foo.example.com,master.example.com
auth-zone=example.com
auth-server=example.com,*

The following queries work from a vm attached to that network:

[root@example-vm ~]# dig +short foo.example.com
master.example.com.
[root@example-vm ~]# dig +short a.foo.example.com
master.example.com.
[root@example-vm ~]# dig +short b.foo.example.com
master.example.com.

And as expected this fails to return anything:

[root@example-vm ~]# dig +short bar.example.com

(Tests were run on Fedora 34, using libvirt-7.0.0-4.fc34.x86_64 and dnsmasq-2.85-1.fc34.x86_64)