if anyone is interested, i wrote a script to improve that a little. obviously it's no replacement for dns, but it makes it easier to share the data - it treats your hosts file as a database that can be both dumped to a file and updated from various sources, including web pages. https://github.com/ghettonet/GhettoNet
I had difficulty understanding namecoin. Do you simply pay for DNS registration with namecoins or is the DNS itself hosted in a decentralized and anonymous fashion?
You pay for the registration and update of names with namecoins and the data is stored in the namecoin blockchain. In this way it is decentralized. Lookups are done directly from the blockchain.