No DNS resolution after apt-get upgrade (openhabian)

What you did by altering /etc/init.d/pihole-FTL is that pihole-FTL is now started as user root (can access all files) instead of before when pihole-FTL was started as the "$FTLUSER" user which default is the user pihole.
Thats why pihole-FTL is now able to read that /var/lib/misc/dnsmasq.leases file which does not belong to Pi-hole with a basic install.

pi@noads:~ $ sudo grep 'root\|pihole' /etc/passwd
root:x:0:0:root:/root:/bin/bash
pihole:x:999:996::/home/pihole:/usr/sbin/nologin

Can you post results for below one to check current permissions and ownership of that file ?

stat /var/lib/misc/dnsmasq.leases

Have a read here for another solution:

Afterwards, if working, you can test blocking/resolution on a client with those host commands addressing both the ipv4 and ipv6 addresses:

xbian@avr ~ $ host -t txt -c ch version.bind 10.0.0.2
Using domain server:
Name: 10.0.0.2
Address: 10.0.0.2#53
Aliases:

version.bind descriptive text "dnsmasq-pi-hole-2.79"

xbian@avr ~ $ host pi.hole 10.0.0.2
Using domain server:
Name: 10.0.0.2
Address: 10.0.0.2#53
Aliases:

pi.hole has address 10.0.0.2

EDIT: oops ... forgot to add a naughty domain :wink:

xbian@avr ~ $ host doubleclick.com 10.0.0.2
Using domain server:
Name: 10.0.0.2
Address: 10.0.0.2#53
Aliases:

doubleclick.com has address 0.0.0.0
doubleclick.com has IPv6 address ::