Question : LMHOSTS not functioning

We have a few sites running NT Server that have trust accounts with our main offices. They resolve the domains through LMHOSTS files. However for some reason today, one of the remote location is unable to resolve and IP addresses based on names. I tried creating a new LMHOSTS file with just a test entry in it and reloaded the cache, still nothing. Verified that TCP/IP is checked to use LMHOSTS. It keeps returning Bad Ip Address... same with the HOSTS file, however they can still use the web through DNS servers. But for some reason NT server isnt checking these files. Any ideas?

Answer : LMHOSTS not functioning

On the machine(s) in question, check if the path to the hosts/lmhosts file is still valid: open the registry and look at the REG_EXPAND_SZ value "DataBasePath" at HKLM\System\CurrentControlSet\Service\Tcpip\Parameters.
If this doesn't point to %SystemRoot%\System32\drivers\etc, note the current path, and change it back.
Then do a really thorough scan for malware; basically the only reason for this path to be changed is that you have caught a virus, spyware, adware, trojan or whatever is out there. Check the files found in the incorrect path; they might reveal something that might help to identify what was installed.