Internet sharing works but the DNS part doesn't

I'm posting this message because I believe it is a bit different from other 'Lion internet sharing' posts in terms of the source of sharing and also the results I get.
Similar to other users experiencing the same problem, my internet sharing setup stopped working as expected after upgrading to Lion. However, I can't say it stopped working completely. It still does work but the DNS part doesn't. This means I can still perform pings, ssh and socket connections from computers using the shared connection. But I cannot browse the internet because web site names can't be resolved.
For example, my MacPro has two Ethernet interfaces. On one of them (en0) I vpn when connecting to work using a VPN service I created via System Preferences => Network. I used to share that VPN connection to computers using the 2nd one (en1). The other computers are linked to (en1) through a multiport hub. This setup used to work flawlessly in Snow Leopard and multiple users could use the shared vpn internet connection.
After the upgrade to Lion I can still see other computers on the local network and also ping any external internet site. I can even use Safari and navigate my ISP's home page using its IP address only. However, DNS doesn't work and internet domains cannot be resolved by name so internet browsing is not possible.
Furthermore, when I don't VPN to work but simply share the connection to the internet from (en0) to computers using (en1) everything works as it used to in Snow Leopard. The difference here is that the same DNS servers are used by both network services.
So far I'm stuck with these findings and I don't know where else to look for answers. Any input or feedback is greatly appreciated.

I've to admit that i don't even know what VPN means.. but..
I have an 27" iMac (mid 2010), a iPhone 4 and a Macbook Pro 13" (mid 2009) .. and i used to share my ethernet connection to wi-fi on Snow Leopard. Since i upgraded to Lion (i'm using it since the first DP, and i think the internet sharing was working under the 1st DP .. i'm not pretty sure), it just doesn't work.
Just like solongpc, it does activate the internet sharing, my other devices can see and connect but neither of then (my iMac - host or my mbp and iphone) can navigate on the internet. And when i turn off my internet sharing (on my iMac), it still not acessing any website.. and i've to restart my moden.

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