It is entirely possible to have generic DNS issue. This could happen for example if the DNS servers provided by the ISP or servers related to the targeted server have issues, or if the network connection is malfunctioning in general for some reason.
However, if network and DNS works otherwise (and for example you can ping google), while Wayfarer fails this most likely is indeed caused by the missing loopback (lo0) interface.
The reason for this behaviour is somewhat technical: In short, libcurl uses loopback interface to implement pipe communications (socketpair) between the main application and the resolver subprocess. If there is no loopback interface available, binding/connecting to 127.0.0.1 will fail and as a result libcurl can't resolve the host name.
To check if this is the root of the problem run "ifconfig" in a shell. If lo0 interface is missing this is the reason for the resolving trouble.
