Good luck, you only need dnsmasq if you need to resolve to your file, if lets say for some reason your offered file is not received completely.
I use dnsmasq because there are IP helpers in my network that over ride my dhcp settings. I also use an out dated netware environment that has limitations on the boot file name length.
This length issue is also present in dnsmasq, that is why you have to symlink undionly.kpxe to undionly.0
Yes it is true that in the ltsp.conf file you have supplied the boot file name in its entirety, but when we began working to provide the undionly.kpxe as a boot file name, dnsmasq still had limitations. I do not know if these limitations are still present.
I hate to see you give up on trying to get dnsmasq to work, I feel it’s a wonderful solution, and with the use of dnsmasq you do not need to even edit the dhcp information to include the fog server or it’s boot file, dnsmasq works as a proxy dhcp server and issues the proper boot information to the client. If you choose to take it up again, dnsmasq that is, I would be happy to help you troubleshoot.