If you DNS client is disabled, and you do not have the name resolution information in a host file, then how could you possibly resolve internet hosts? Internet hosts NEED a FQDN (Fully qualified domain name). That is why we use the .com, .net, .edu, etc. In order to resolve it, you need a resolution method. For a FQDN name, the only two methods are via DNS, or a host file. LMhosts, netbios broadcasts, and WINS won't work for internet host. They are based of a flat naming structure.
Now, it is possible that your machines will querry a hosts file prior to performing a DNS lookup. If your host file querry fails, then outside of DNS, you have no way to resolve internet hostnames.
Go to a command prompt, and type: NSLOOKUP
What happens?
I'll try and do some research on registry settings for hostname resolution order. There is a certain configuration that determines if you use DNS prior to Host files. Microsoft security seminars have been beating this topic for a while. Previous versions used hosts files prior to DNS, but would still use DNS if the entry was not found in the host file. Microsoft said that by XP SP2 it was supposed to be changed so that DNS would be the preferred resolution method. It would "theoretically" help speed up the resolution process as most people only have a loopback address in the host file, and querrying it is unecessary.