No ideas. It simply worked for me but I've also been using the same setup for several years. Here are a few lines from my statichosts.txt:
10.0.41.21 dvkldb02
10.0.41.22 dvkldb03
10.0.41.24 dvkldb05
After making updates and restarting the service the host file should be read into the cache. In DNS Resolution re-enable "resolve the ip address of the sending device". In DNS Caching enable "Pre-load the cache with static entries from a hosts file". Make sure the file name is the statichosts.txt.
Restart the syslog service.
In DNS Caching review the number of entries in the cache, it should be,at least, the number of entries in the statichosts.txt file. Then click on view to see the cached entries. This should show you the static hosts and any other cached DNS names.
If that is not working it's probably worth a support ticket to review the installation.