Exchange Setup does not work because of Domain Name System settings on the domain controller

To resolve this issue, make sure that the DNS settings on the schema master domain controller and the member server are pointed to valid internal DNS servers. If the schema master is the DNS server, make sure that the schema master uses its own Internet Protocol (IP) address and is the preferred DNS server.

To change the DNS settings:

1. Right-click My Network Places, and then click Properties in the shortcut menu to open the Network and Dial-up Connections dialog box.
2. Right-click Local Area Connection, and then click Properties in the shortcut menu.
3. Click Internet Protocol (TCP/IP), and then click Properties.
4. Change the preferred DNS server.

http://support.microsoft.com/kb/264001