privoxy and dnsmasq

I have a number of known ad sites listed in my /etc/hosts and blocked
locally by using dnsmasq. I also use privoxy on this server. I can tell
I have dnsmasq configured correctly for local DNS lookups to use it,
since I can do this:

ping ads.doubleclick.net
PING ads.doubleclick.net (127.0.0.1) 56(84) bytes of data.
64 bytes from localhost.localdomain (127.0.0.1): icmp_seq=1 ttl=64
time=0.070 ms

and it resolves to localhost instead of the ad server.

My issue is, it seems like privoxy ignores this and does its own DNS
lookup or something? When I block a site this way, the request is still
processed by privoxy (i.e. instead of no ad at all using the
DNS/localhost block I get the "blocked by privoxy").

Is there any way to change this behavoir, so that privoxy only processes
requests going to sites other than 127.0.0.1/localhost?

Essentially I am trying to speed up the privoxy processing, so each
page loads faster (to do content filtering privoxy must completely
load each page before giving to the browser, so it "feels" slower).

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