Bumping this one as I believe this excellent HowTo points out some important pitfalls that users experience like conflicting daemons and how lighttpd is used to return a blank ad.
Maybe you could add a "Hostname recommendation" section too as people configure their Pi often with only a short name?
For allot of software, especially the ones depending on DNS resolution, a FQDN is required:
FQDNs can be a requirement
Some things like web servers that use name based virtual hosting or load balancers, etc... absolutely require that you address them via an FQDN or hostname. They determine how to respond to your request based on the FQDN that you are connecting to. Connecting via an IP may not work at all.
SSL certificates are issued based on domain names, so you may not be able to use some SSL enabled services (properly) without DNS.
Its always harder to fix after.