Windows 7 clients not updating DNS on Server 2003

Problem: Windows 7 clients are not updating their DNS records creating DNS entries for multiple PCs with the same IP. This did not happen on our XP clients and has only started happening since deploy Win 7 clients.

Environment: Win 7/XP clients on Server 2003 DCs (DNS/DHCP), about 80 users

I have found several articles that recommend two things.

1. Updating the DNS tab on TCP/IP settings of the Win 7clients to append DNS suffixes and register them with DNS. (I have tried this, but it does not seem to work.)
2. Changing the setting on the DHCP server to "Always dynamically update DNS A and PTR records." - This seems like the silver bullet, but I am hesitant to make this change for fear it might break something. Is this OK to change? From what I understand, Win7 clients need help updating their records and this setting does that...but, will it cause me other issues?

Has anyone else seen this?

Thanks for any help...this is a major obstacle in our Win 7 rollout....