Need to use dnsmasq to act as DHCP/DNS server: http://blogging.dragon.org.uk/howto-setup-dnsmasq-as-dns-dhcp/

Right now the sub computer acts as the DNS server, should make router do this.

current dnsmasq settings

Also important is to set a static IP in /etc/network/interfaces file:

auto lo etho
iface lo inet loopback
iface eth0 inet static
     address 192.168.0.7
     netmask 255.255.255.0
     gateway 192.168.0.1