I have successfully setup a site to site VPN connection between 2820(router1) and 2710(router2).

Router1 has domain controller(DC) behind it that i want to use for DNS but i cant get it to work properly. In Lan properties i have set the primary DNS of router2 to be DC and verified that this is given to computers sitting behind router2. However i can ping the DC via IP but not by name even though it is succesfully querying the DC for DNS requests.

The first thing i did was to telnet into router2 and add the DC as a Primary WINS server. This now allows me to ping machines by name.domain but not by name only. To fix this i think i need to add a DNS Suffix to the DHCP server so that it automatically adds .domainname to any dns requests. Is this possible?

Newer versions of DNS servers running on Windows might default to accept queries only from the local subnet.
Check the properties of the DNS server.