A. This is by design. Single label domains have always been frowned on and their use strongly discouraged for many reasons, including application compatibility and general usability problems.

The Server 2008 DCPromo wizard gave a warning if you tried to create a single label domain, but it would let you create it. Server 2008 R2's DCPromo wizard, however, will block you, and this will be the policy going forward for future versions.

Note that this doesn't stop you from adding new domains on Server 2008 R2 as child domains to an existing single label domain, because your new domain wouldn't be single label! This is confirmed on Microsoft's site.

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