I was in need of this setting as well and came up with a hack solution.
On the router, edit /etc/rc.local and add the following before the "exit 0", changing "mydomain.com" to whatever domain name you want to use:
cat > /tmp/dnsmasq.d/mydomain.dns << EOF
domain=mydomain.com
local=/mydomain.com/
EOF
That will write the two lines ("domain=..." and "local=...") into the "/tmp/dnsmasq.d/mydomain.dns" file every time the device boots. This file will then be included in the dnsmasq configuration when it is referenced via the "conf-dir=/tmp/dnsmasq.d" directive (part of the generated config). The net result is that the two lines override the generated config, leaving you with the domain name you want and probably breaking some other functionality somewhere.
Your mileage might vary. I'm dropping this here partially as a note to myself so that I can remember what I've mucked with. :)
