Comment 5 for bug 287596

had a talk with Asac, most probably thought it was just a spelling mistake so changed it from 'dns-nameserver' to 'dns-nameservers' as well.

auto lo
iface lo inet loopback

auth eth1
iface eth1 inet static
    address 192.168.1.3
    netmask 255.255.255.0
    gateway 192.168.1.1
    dns-nameservers 192.168.1.1

Also tried changing dns-nameservers to 61.1.96.69, 61.1.96.71 but still no go.

Then did the sudo killall nm-system-settings

In fact trying to ping 192.168.1.1 gives me the following :-

$ ping -c5 192.168.1.1
PING 192.168.1.1 (192.168.1.1) 56(84) bytes of data.
From 169.254.4.102 icmp_seq=1 Destination Host Unreachable
From 169.254.4.102 icmp_seq=2 Destination Host Unreachable
From 169.254.4.102 icmp_seq=3 Destination Host Unreachable
From 169.254.4.102 icmp_seq=4 Destination Host Unreachable
From 169.254.4.102 icmp_seq=5 Destination Host Unreachable

$ ping -c5 192.168.1.3
PING 192.168.1.3 (192.168.1.3) 56(84) bytes of data.
From 169.254.4.102 icmp_seq=1 Destination Host Unreachable
From 169.254.4.102 icmp_seq=2 Destination Host Unreachable
From 169.254.4.102 icmp_seq=3 Destination Host Unreachable
From 169.254.4.102 icmp_seq=4 Destination Host Unreachable
From 169.254.4.102 icmp_seq=5 Destination Host Unreachable

This is the same result with both the dns-nameservers.

So the only way is to do nm do whatever it wants to do. :(