>Adding a conditional ("do I answer or do I proxy?") on every DNS query -- and there are many -- is going to introduce enough latency to be noticed unless you throw a lot of gear at it. And you're still going to introduce latency by inserting another hop. That's my point, though I do agree with you.

Welcome to the world of recursive name servers, there is a lot of software out there that does exactly what you just mentioned, I fail to see what would be hard about making this change.