Leave the "Under Modem > DNS" setting on factory defaults.
You're lacking a Advanced > Networking > DHCP > DNS server(s) setting for a proper setup.
But it seems you can disable the DHCP server with that ON/OFF switch.
Are you running Pi-hole bare metal and not in a VM or Docker container?
If so, have a look at below FAQ on how you can let Pi-hole take over that part:
Make sure the Pi-hole host is configured with a true static IP before making the switch!
If it runs in Docker, you need additional instructions and possible also if running in a VM depending networking topology.