Custom Local DNS entry ignored
I'm assuming you are using Mac OS X, since you mention scutil. nslookup doesn't use the same mechanisms as the rest of the OS:

From man nslookup:


  Mac OS X NOTICE
  
  The nslookup command does not use the host name and address resolution or the DNS query routing mechanisms used by other processes running on Mac OS X.  The results of name
  or address queries printed by nslookup may differ from those found by other processes that use the Mac OS X native name and address resolution mechanisms.  The results of
        DNS queries may also differ from queries that use the Mac OS X DNS routing library.