Details about my system:
Dockerized pi-hole running on rpi4
What I have changed since installing Pi-hole:
No changes- this feature has never worked for me.
Interestingly the pi-hole does stop shopping _gateway and instead shoes router.jam
Wherever the local DNS service at 127.0.0.53 on your client is forwarding DNS requests to - it is not Pi-hole, or the answer would have been Pi-hole's IP address.
You'd have to configure that local DNS service to make use of Pi-hole.
Commonly, it is not necessary to configure your router to use Pi-hole as its upstream DNS server if you are already successfully distributing Pi-hole as local DNS server via DHCP.
Also note that your previous configuration would have allowed your router to by-pass Pi-hole via 8.8.8.8.
As stated in the linked docs, Pi-hole has to be your only DNS server.