Pihole seems to be redirecting all local DNS to the internet

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Your output shows that the [A] queries (IPv4) are being answered locally.

Mar 12 22:46:11: query[A] nas2.home from 192.168.1.246
Mar 12 22:46:11: Pi-hole hostname nas2.home is 192.168.1.2

The [HTTPS] queries are being forwarded, as expected, because there is no local answer to this query.