Question : Other then my DNS setting on my Proxy server, do I realll need an internal DNS server for fewer than 100 workstations?

Can I just manually set up each PC to log onto a domain server? by editing the host file or something in GPEdit?  on the server or/and workstaitions?

Answer : Other then my DNS setting on my Proxy server, do I realll need an internal DNS server for fewer than 100 workstations?

Two DNS is "best practice" for reduncancy and fault tolerance. If you've got two Domain Controllers (best practice says two for the same reasons as to having two DNS) make the DNS zones Active Directory integrated. You get better replication between the zones and you're not dependant on the primary zone going down (you cannot make changes to a secondary zone). You can host more than one zones on each DNS.

Look at AD Integrated DNS: http://technet.microsoft.com/en-us/library/cc978010.aspx and how to convert a primary zone to a AD Integrated: http://support.microsoft.com/kb/198437