send specifies the options to send to the DHCP server. You're assuming that send host-name "foo.bar" means send foo.bar as the hostname. Yet it means send the hostname and the string "foo.bar" to the dhcp server.

You need two lines:

option host-name "foo.bar";
send host-name;

You need to check whether the hostname is actually sent. If it is, the problem lies with the dhcp server not updating the DNS records.

send specifies the options to send to the DHCP server. You're assuming that send host-name "foo.bar" means send foo.bar as the hostname. Yet it means send the hostname and the string "foo.bar" to the dhcp server. You need two lines: option host-name "foo.bar"; send host-name;