In general this works rather well; it sure makes it easier to figure out what type of machine you have, where it is in the lab, etc.
Unfortunately, we just installed our 76th machine of hardware-type-2. And we're out of IPs in our DNS scheme. Oops. Time to change our DNS scheme. It's not really a big deal, and it's not really an error. After all, when we set up this scheme, we had a total of 5 machines of hardware-type-2 and didn't think we'd ever get more than about 50.
All we have here, as my colleague John calls it, is a case where "good planning meets contact with the enemy".