Running: cat /etc/resolv.conf confirmed that the vpn dns was not being used.
After googling around a bit I came across this site which gave me a clue on how to configure my dns look ups. I just had to add the following line to my vpnc config file:
NAT Traversal Mode cisco-udp
Now when I ran vpnc, and ran cat /etc/resolv.conf, it confirmed that my vpn dns was used! :)
The complete vpnc config file looks like this:
IPSec gateway xxx.xx.xxx.xxx
IPSec ID your_id
IPSec secret your_secret
IKE Authmode psk
NAT Traversal Mode cisco-udp