This is what I THINK can happen and what I want.
I create a VPC in Amazon, put a public subnet into it, put a puppet server instance and a full stack web server instance in the VPC.
Now I set the hostname for the puppet server 'puppet' and for the web server as 'webserver'.
I then set a DHCP option set with the domain name as 'my-company-name.com.local', Use Amazon provided DNS, and associate it with the VPC. I create a Zone record using Route 53 with the same domain name.
I then force the two instances to get new DHCP leases and VOILA! they get private IP addresses and DNS gets automatically updated for forward and reverse DNS lookups.
Now 'puppet.mycompany.com.local' can find 'webserver.mycompany.com.local' and visa versa within the private side of the networking in my VPC.
The two questions are: A) Is that how DNS and DHCP work (especially the automatic cooperation between them)? I don't have to manually enter the DHCP assigned IP addresses in DNS records, do I? B) How do I set this to work, most probably, what DNS records do I need to create and any other steps?