When I am on the server, it can even ping the domain. On my laptop, it can only resolve the domain to the correct ip

Changing the domain does not change the problem sadly. I thought .local is a safe one to use

So in the dnsmasq.config file is this entry: ‘address=/server.local/192.168.178.10’ and using nslookup it resolves it correctly

I have read the same, but also read it is not very true anymore, specially with dedicated server drives. I would not worried too much about it honestly