@45lightrain Lets cover a few things that I’m aware of that might help you get to the bottom of the issue.
When you have a ProxyDHCP server and normal dhcp server on your network you will get two dhcp OFFERS. Well I guess it would be the same if you had two dhcp server you would see two offers, but that is a bit off point. You can tell if an OFFER packet is a proxy dhcp packet because dhcp option 60 will be set to PXEClient in the ProxyDHCP OFFER. That is a signal to the pxe booting client to come back and ask about pxe booting from the ProxyDHCP server. The pxe booting client will ignore the pxe boot information from the main dhcp server. A properly formed dhcp packet will have both the fields in the header {next-server} and {boot-file} filled out for the bootp booting protocol part of the protocol AND should have dhcp option 66 and 67 set for the dhcp booting protocol. Both must be filled out because its up to the pxe booting client to pick either the dhcp or bootp protocol. Your ltsp files are correct. The last one you posted has the dhcp-range… commented out, that turns off the proxydhcp feature in dnsmasq.SO if you have a pihole server that runs dnsmasq, why are you running an external dnsmasq server. Does your pihole server have pxe boot options? I know pfsense has built in pxe boot fields you can fill out that supports dynamic (bios/uefi) boot loaders.
When trying to debug this wireshark/tcpdump is your friend that tells you what is flying down the wire. Just remember that dhcp is based on broadcast messages so you can “hear” them from any network port, and proxyDHCP like other unicast messages must be captured at the source, destination, or via a mirrored port.