I don't have my 7.3 system up at the moment, but here is what I can remember from when I was playing with that feature.
When you are using the standard DNS settings the MWG will ask your DNS server everytime I needs to know an address. If your DNS server has issues, as seems to be the case here, these lookups can take longer than they should, delaying your web traffic.
When enabling the conditional forwarders, the MWG starts its own BIND instance and performs all queries against that. From there the local instance can cache entries and provide answers even when the normal resolvers are unresponsive. All queries go through the local instance, it only behaves differently for the domains that you have configured in the conditional list.
MWG contains its own cache for DNS. Negative entries (host is unknown) are cached only for a very short time (few seconfs).
If MWG does not get a reply for a DNS query, it waits (up to 30s for each cinfigured name server). If you use the same address again and again, you will get a big delay every few seconds.
Using conditional DNS uses bind running on local host. If bind caches queries without response for a longer time, it is much faster.