That's also the old behaviour of browsers and the current one of text browsers. I fail to see how this is wrong.
$ lynx doesnotexist2
Looking up doesnotexist2 first
Looking up www.doesnotexist2.com, guessing...
Looking up www.doesnotexist2.edu, guessing...
Looking up www.doesnotexist2.net, guessing...
Looking up www.doesnotexist2.org, guessing...
Can't Access `file://localhost/home/user/doesnotexist2'
I hate this behaviour because it means if I typo an internal hostname suddenly it gets broadcast to everyone's DNS resolver, and wastes some time in the process (and in the worst case, takes me to a random website I never intended to visit). I always have to rummage around in about:config or whatever to disable it, because that behaviour is never what I expect nor intend.