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Anyone using DNS search lists to have localhost resolve to e.g. localhost.example.com would potentially have problems. Obviously this is a pretty weird thing to intentionally do, but it currently gives you a quick way to get around certain issues. Obviously this is ugly, but in some ways that actually makes breaking it more problematic: Things which this breaks are likely to be things that are difficult to fix.

Within ".localhost."...

www.localhost.mydomain.com?

The trailing "." signifies the end of the domain name, so your example domain would be unaffected.

Thanks, I misread the draft as '<star>.localhost.<star>'(!)

> Application software MUST NOT use a searchlist to resolve a localhost name.

Hmm I guess people may use IPs other than 127.0.0.1 like 127.0.0.2 for Docker or maybe VPN/VM shenanigans...

This remains valid under the draft.