It was well known that NetworkManager does not play well with dnsmasq (ref: here). I've skimmed throught the lengthy discussion here but still not sure what the recommended way to deal with the situation is.
All that I want is to do is to use dnsmasq to provide DNS and DHCP to my local network.
I'm running Scientific Linux 6.3 and just updated the machine to dnsmasq-2.48-13.el6.x86_64. The machine is on local ip 192.168.1.100. I have a local caching DNS setup that was working until the update.