WordPress MU

I am using WPMU 2.9.2 on localhost,and when i create a new blog in admin panel and go to that blog url then get server not found error.but after making an entry of IP-blog address pair in host file under C:\WINDOWS\system32\drivers\etc, i can go to my new blog.

So,i want to know,is there any method to remove this host file entry dependancy after creating a new blog on localhost?

You'll have to install a DNS server locally and add the wildcard to that.

If this is a test environment, it's easier to add it to the hosts file.

If this is a production environment and on the net, the box should be responsive to a DNS server. May want to check on that.