DNS server for LAN

Yeah, mostly. Your SOA record is missing its responsible-person email address, though.

Use dnsmasq. It's a lightweight DHCP/DNS server. It automatically serves stuff in /etc/hosts and DHCP leases as DNS entries, forwards everything else to your ISP's DNS server.

Works like a charm, extremely easy to configure.

I would fully qualify the file command in your named.conf.local so it would look like file /etc/bind/local-network

Also i would make sure that the bind daemon user has read permissions to the zone file.

Do you have any error messages in /var/log/messages or /var/log/daemon.log ? (I've seen bind write to both places.)

$ORIGIN .  
$TTL 3600       ; 1 hour  
domain.com               IN SOA ns1.domain.com. user.domain.com. (  
                                2008123002     ; serial  
                                900        ; refresh (15 minutes)  
                                600        ; retry (10 minutes)  
                                86400      ; expire (1 day)  
                                3600       ; minimum (1 hour)  
                                )  
                        NS      ns1.domain.com.    
                        A       <ip of host>  

$ORIGIN domain.com.  
ns2             IN      A       x.x.x.x  
ftp             IN      A       x.x.x.x