I used to be hosting 49,000 domains...ah the good old days...
The odd thing is about the above settings is that the generic "Host anything" DNS settings work fine, but it also re-routes the file_get_contents function back to itself. So there is obviously something that file_get_contents uses in the DNS to go outside, that is getting wildcarded to come back inside.
It's like the zone "." command means "everything coming in AND going out" rather than just everything coming in.
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