We are having .local issues at the institution I work for as well. What we're seeing is that most applications (e.g. browsers, Finder for connecting to shares) will not connect to a server using an FQDN ending in example.local, but they will connect to the server just fine if only the hostname is specified and example.local is in the search domain.
Mail.app seems to be an exception to this, in that it will still connect, but it takes an inordinate amount of time for that initial connection to come up.
It seems that Yosemite's implementation of Bonjour sticks much more strictly to RFC 6762, and so it assumes anything that uses .local explicitly should be resolved using mDNS, rather than traditional unicast-DNS. In previous releases, these queries were done in parallel, but now I'm not even sure the unicast query happens at all.