What none of the answers posted so far addresses is the appearance that the questioner fails to understand that having "nameserver 127.0.0.1" in /etc/resolv.conf is correct, assuming that a local nameserver is running. And in Ubuntu 12.04 Desktop there is, by default, a local nameserver running, namely, a dnsmasq process controlled by NetworkManager which listens on 127.0.0.1. In Ubuntu 12.10 the listen address has been changed to 127.0.1.1.
So the solution is not to make any changes to resolv.conf. It is correct, assuming that the questioner wants to use the local nameserver.
If name service is not working then the local nameserver is not being given correct forwarding addresses, or there is some other networking problem.
The questioner tried using the "network settings GUI" to "generate the file with the right settings" and this failed to work. I don't know exactly what this means, but here is the right way to enter nameserver addresses so that they end up in resolv.conf at the right time. I assume that the questioner is using NetworkManager and not ifup to configure interfaces.
Most often interfaces are configured using the DHCP protocol. In that case nothing needs to be configured on the local system. The DHCP server knows what nameserver address its clients should use and sends this information to the DHCP client, which sends it to NetworkManager, which sends it to resolvconf, which puts the information into resolv.conf. So in this case it is the DHCP server that may need to be configured.
If the network interface on the local machine is statically configured then the correct nameserver addresses have to be entered into NetworkManager at, for example, network indicator | Edit Connections... | Wireless | myconnection | Edit... | IPv4 Settings | Additional DNS servers.
It is possible that the local nameserver is not working properly. In that case the questioner should edit /etc/NetworkManager/NetworkManager.conf
sudo gedit /etc/NetworkManager/NetworkManager.conf
and comment out the line
in the "[main]" section. To comment out the line, put a '#' at the beginning of the line, then save the file. Then restart network-manager.
sudo restart network-manager
After this, non-local nameserver addresses will be entered into
resolv.conf instead of the 127.* address.
If the questioner is using
ifup rather than NetworkManager to configure network interfaces then jmartin2279's answer is correct: you have to add the nameserver addresses to /etc/network/interfaces in the way jmartin2279 described.
Contrary to what some other answers advise, in general you should not add
search options to files in /etc/resolvconf/resolv.conf.d/. See my comments on those answers.