Can ONE server be a DNS server AND a hosting server to host a websites files?
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Yes, you can run a web server, DNS server, mail server and any other services you like on the one machine. However there are some things you may want to consider:
I'm not sure I buy the "yes, but if one service is compromised the others can be too" argument, as surely the web server user would not be able to edit the name servers zone files...