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To resolve private DNS records from VMs in a VNet without updating the nameserver to 168.63.129.16, you can set up a DNS server in your target virtual network. Here are the steps:
Set up a DNS Server in the Target Virtual Network: Deploy a VM in your target virtual network and configure it as a DNS server. This DNS server should be able to forward queries to the Azure recursive resolver (168.63.129.16).
Configure DNS Forwarder in the Source Virtual Network: Deploy another VM in your source virtual network and configure it as a DNS forwarder. This forwarder should forward DNS queries to the DNS server in your target virtual network.
Update DNS Settings in the Source Virtual Network: Configure your source DNS server in the DNS settings of your source virtual network. This will enable DNS resolution between virtual networks and allow your on-premises machines to resolve Azure-provided host names.
For more detailed information, you can refer to the Name resolution for resources in Azure virtual networks documentation.
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Regards,
Deepanshu