You can enable DNS proxy in tor config file (it's off by default I think).
If non-zero, Tor listens for UDP DNS requests on this port and resolves them anonymously. (Default: 0).
Bind to this address to listen for DNS connections. (Default: 127.0.0.1).
If true, Tor does not believe any anonymously retrieved DNS answer that tells it that an address resolves to an internal address (like 127.0.0.1 or 192.168.0.1). This option prevents certain browser-based attacks; don't turn it off unless you know what you're doing. (Default: 1).
I would love to have Tor implemented on the router. Speed is not a problem, because I have a router flashed with dd-wrt that I'm using as a router, but I found it cheaper to buy a router and flash it with dd-wrt and turn it into a client/bridge than to but a PCI card or USB device. So I would love to have the Tor running on this client for dd-wrt. There hasn't been much response, so I'm not sure if it's a dead idea or what.
For gods sake folks, the developers are running out of memory and has already been forced to cut out modules from the standard firmware.
There wont be more memory available for them when they have been able to fix all current bugs.
I've now seen requests for apache server, torrent tracker among other things.
It doesn't belong in a router with limited cpu power and limited memory.
So I voted that this is just another stupid idea..