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I couldn't get the ".local" shortcut to work in Lion. After some searching online (here: http://www.justincarmony.com/blog/2011/07/27/mac-os-x-lion-etc-hosts-bugs-and-dns-resolution/), it looks like the ".local" TLD is reserved by Bonjour and so weird things happen with those domains. Instead, per the articles's suggestion, I used ".dev" instead and everything works great!