I'm doing just that.  Works fine.
Install DNS on the NT server.  It will have one of the NICs be a gateway to
the internet.
Then take your DHCP server and program it so the machine(s) hosting DNS is
referenced as the DNS host.

Yes, it is possible, just install DNS then point your machines to them for
DNS. About the only tip is to give your NT DNS servers a forwarder to your
ISP's DNS.
To do this use the DNS console, on each of the DNS servers in the console
right click on them choose properties, on the Forwarders tab, enable
Forwarders and put your ISP DNS servers in the list.
Since you are wanting to speed up DNS and reduce traffic, I suggest you
increase your maximum cache TTL (Time to Live). This tells the DNS server
how long to keep records in the cache, it helps DNS if at least the NS
records are in cache. Default maximum cache ttl is only one day so all
records must be refreshed daily, even NS records. The ICANN Root NS records
have a ttl of 6 days the gTLD servers are 2 days as are many socond level
domain NS records. Having the NS records already in cache lets your DNS
server go directly to the proper content DNS with out have to lookup the NS
records from the root. I suggest a MaxCacheTtl of at least 2 days, just for
your info BIND's default maximum cache is 6 days.

Enter this value in seconds.

HKEY_LOCAL_MACHINE\System\CurrentControlSet\Services\DNS\Parameters

MaxCacheTtl

  Value:      MaxCacheTtl
  Added:    SP4 (April 1998)
  Type:     DWORD
  Default:  NoKey (Cache for up to one day, or 86400 seconds)
  Function: Set maximum caching TTL.

198408 - Microsoft DNS Server Registry Parameters, Part 1 of 3:
http://support.microsoft.com/default.aspx?scid=198408