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Also note as of LXD 2.3 there may be networking tools that take care of this. Not looking into 2.3 details yet as Ubuntu Server 16.04.2 LTS is packaged with 2.0.9.
You may also set these setting when network is being setup when running the lxd init command.
Modify /etc/default/lxd-bridge to reference an external dnsmasq.conf,
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