I've tried recreating the configuration on my local machine, and it works just fine. Really confusing. I don't understand why I get absolutely no DNS traffic on my nginx server (beyond the few calls from other services). Not a single call from nginx.
Also, I read in the documentation that "By default, nginx caches answers using the TTL value of a response", and then everywhere else I'm told it doesn't. We never had a resolver before I updated to 1.10, and it worked fine for years. Another mailing list post mentions that the issue of TTLs being ignored would be "fixed" way back in version 1.1: https://forum.nginx.org/read.php?2,217468,217468#msg-217468 Did it get removed or put into nginx Plus only by version 1.10?
I'm still not sure whats going on, and from my month+ of research, it seems I'm the only one having this problem...