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Yeh, that's typical for the console homebrew exploits though. (Or at least control of the resolver - the instructions looks like the author has a exploit server running for ease)

At the very least (beyond the extra TCP DNS fields) you need to ignore/drop the two UDP DNS requests the Wii U makes before failing to TCP.

It seems like you can set the DNS server directly on the device itself, bypassing the local DNS resolver.

See https://github.com/GaryOderNichts/DNSpresso#instructions

Very nice - so this is the perfect exploit - pretty hard for evil people to do, but easy for the device owner to do to regain control of their own hardware.

ARP spoofing allows this attack to be run. Still needs to be in the local network though. (Pretend to be the router and intercept the DNS.)

No, you define a connection on the WiiU and provide the DNS server as a parameter. The author has a DNS server up there sending your WiiU a request that causes it to run a payload (which resides on your SD card).