ISP DNS and LAN DNS

I have a single domain and one W2K DNS server, also few ISP DNS IP address. I configure “Preferred DNS Server” under TCP/IP by using ISP’s DNS IP on both workstations and Servers (included DNS server itself) so that we can access Internet. is that correct? However, If I set our DNS’s IP address as “preferred DNS server”, then unable to access Internet. what’s the relationship between our DNS IP and ISP’s IPs. how can i get it right?