It seems like the problem with doing this is that there are multiple localhost IPs. If it was as simple as "every A query for [any].localhost is 127.0.0.1, every AAAA query is ::1" then it would be one thing, but the A query could also be 127.0.0.2 etc.
So for example this would mean that if I put an entry for "server5.localhost 127.0.0.5" in my local DNS server then that entry can't be used, because the client's local resolver API will match *.localhost and it now "MUST NOT send queries for localhost names to their configured caching DNS server(s)" so it likely returns 127.0.0.1 instead of 127.0.0.5.
So for example this would mean that if I put an entry for "server5.localhost 127.0.0.5" in my local DNS server then that entry can't be used, because the client's local resolver API will match *.localhost and it now "MUST NOT send queries for localhost names to their configured caching DNS server(s)" so it likely returns 127.0.0.1 instead of 127.0.0.5.